G.R. No. 101089. April 7, 1993.
In those cases where the presumption is applied,
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
Modesto S. Bascos for petitioner.
Pelaez, Adriano & Gregorio for private respondent.
SYLLABUS
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO
DETERMINE COMMON CARRIER. — Article 1732 of the Civil Code
defines a common carrier as "(a) person, corporation or firm, or association
engaged in the business of carrying or transporting passengers or goods or
both, by land, water or air, for compensation, offering their services to the
public." The test to determine a common carrier is "whether the given
undertaking is a part of the business engaged in by the carrier which he has
held out to the general public as his occupation rather than the quantity or
extent of the business transacted." . . . The holding of the Court in De
Guzman vs. Court of Appeals is instructive. In referring to Article 1732 of
the Civil Code, it held thus: "The above article makes no distinction between
one whose principal business activity is the carrying of persons or goods or
both, and one who does such carrying only as an ancillary activity (in local
idiom, as a "sideline"). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation service on a
regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguished
between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business
only from a narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS
TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE
ABSOLUTE. — Common carriers are obliged to observe extraordinary
diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the
goods are lost, destroyed or deteriorated. There are very few instances when
the presumption of negligence does not attach and these instances are
enumerated in Article 1734.
the common carrier must prove that it exercised extraordinary diligence in
order to overcome the presumption . . . The presumption of negligence was
raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence
to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED
NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De
Guzman vs. Court of Appeals, the Court held that hijacking, not being
included in the provisions of Article 1734, must be dealt with under the
provisions of Article 1735 and thus, the common carrier is presumed to have
been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or
irresistible threat, violence, or force. This is in accordance with Article 1745
of the Civil Code which provides: "Art. 1745. Any of the following or
similar stipulations shall be considered unreasonable, unjust and contrary to
public policy . . . (6) That the common carrier's liability for acts committed
by thieves, or of robbers who do not act with grave or irresistible threat,
violences or force, is dispensed with or diminished"; In the same case, the
Supreme Court also held that: "Under Article 1745 (6) above, a common
carrier is held responsible — and will not be allowed to divest or to diminish
such responsibility — even for acts of strangers like thieves or robbers,
except where such thieves or robbers in fact acted "with grave of irresistible
threat, violence of force," We believe and so hold that the limits of the duty
of extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS
CONCLUSIVE. — In this case, petitioner herself has made the admission
that she was in the trucking business, offering her trucks to those with cargo
to move. Judicial admissions are conclusive and no evidence is required to
prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES
A FACT. — Petitioner presented no other proof of the existence of the
contract of lease. He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF
AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of
Juanito Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned from the
contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS
WHAT LAW DEFINES IT TO BE. — Granting that the said evidence were
not self-serving, the same were not sufficient to prove that the contract was
one of lease. It must be understood that a contract is what the law defines it
to be and not what it is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of
Appeals in "RODOLFO A. CIPRIANO, doing business under the name
CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs.
ESTRELLITA M. BASCOS, doing business under the name of BASCOS
TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive
portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE
for short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons
of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse
of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due
to theft, hijacking and non-delivery or damages to the cargo during transport
at market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to
pay. Eventually, Cipriano filed a complaint for a sum of money and damages
with writ of preliminary attachment 4 for breach of a contract of carriage.
The prayer for a Writ of Preliminary Attachment was supported by an
affidavit 5 which contained the following allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57
the Rules of Court, whereby a writ of preliminary attachment may lawfully
issue, namely:
"(e) in an action against a party who has removed or disposed of his property,
or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by
the present action;
6. That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17,
1987.
In her answer, petitioner interposed the following defenses: that there was no
contract of carriage since CIPTRADE leased her cargo truck to load the
cargo from Manila Port Area to Laguna; that CIPTRADE was liable to
petitioner in the amount of P11,000.00 for loading the cargo; that the truck
carrying the cargo was hijacked along Canonigo St., Paco, Manila on the
night of October 21, 1988; that the hijacking was immediately reported to
CIPTRADE and that petitioner and the police exerted all efforts to locate the
hijacked properties; that after preliminary investigation, an information for
robbery and carnapping were filed against Jose Opriano, et al.; and that
hijacking, being a force majeure, exculpated petitioner from any liability to
CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of
which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR
HUNDRED FOUR PESOS (P156,404.00) as an (sic) for actual damages
with legal interest of 12% per cent per annum to be counted from December
4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for
attorney's fees; and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March
10, 1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed
the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF
THE RESPONDENT COURT THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT,
NEVERTHELESS, IT ERRED IN FINDING PETITIONER LIABLE
THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE TO
FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING
OF THE TRIAL COURT THAT PETITIONER'S MOTION TO
DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT HAS
BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF
THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a
common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found
that she admitted in her answer that she did business under the name A.M.
Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a
common carrier. The respondent Court also adopted in toto the trial court's
decision that petitioner was a common carrier, Moreover, both courts
appreciated the following pieces of evidence as indicators that petitioner was
a common carrier: the fact that the truck driver of petitioner, Maximo
Sanglay, received the cargo consisting of 400 bags of soya bean meal as
evidenced by a cargo receipt signed by Maximo Sanglay; the fact that the
truck helper, Juanito Morden, was also an employee of petitioner; and the
fact that control of the cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner
was a common carrier, she alleged in this petition that the contract between
her and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the
truck. She cited as evidence certain affidavits which referred to the contract
as "lease". These affidavits were made by Jesus Bascos 8 and by petitioner
herself. 9 She further averred that Jesus Bascos confirmed in his testimony
his statement that the contract was a lease contract. 10 She also stated that:
she was not catering to the general public. Thus, in her answer to the
amended complaint, she said that she does business under the same style of
A.M. Bascos Trucking, offering her trucks for lease to those who have cargo
to move, not to the general public but to a few customers only in view of the
fact that it is only a small business. 11
We agree with the respondent Court in its finding that petitioner is a common
carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or firm, or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12
In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation of
affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil
Code, it held thus:
"The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1732
deliberately refrained from making such distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must
be understood that a contract is what the law defines it to be and not what it
is called by the contracting parties. 15 Furthermore, petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact has
the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the
goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs.
Court of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he
must prove that the robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article 1745 of the Civil
Code which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible — and
will not be allowed to divest or to diminish such responsibility — even for
acts of strangers like thieves or robbers except where such thieves or robbers
in fact acted with grave or irresistible threat, violence or force. We believe
and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence
or force."
To establish grave and irresistible force, petitioner presented her accusatory
affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".
However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of private respondent, the respondent Court
had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We
are not to determine the probative value of evidence but to resolve questions
of law. Secondly, the affidavit of Jesus Bascos did not dwell on how the
hijacking took place. Thirdly, while the affidavit of Juanito Morden, the
truck helper in the hijacked truck, was presented as evidence in court, he
himself was a witness as could be gleaned from the contents of the petition.
Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and
robbery against the accused named in said affidavits did not necessarily mean
that the contents of the affidavits were true because they were yet to be
determined in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial
issues involved, We find no reason to disturb the conclusion that the motion
to lift/dissolve the writ of preliminary attachment has been rendered moot
and academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's
claim cannot be sustained. The petition is DISMISSED and the decision of
the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
G.R. No. L-47822 December 22, 1988
PEDRO DE GUZMAN, petitioner,
vs.
COURT OF APPEALS and ERNESTO CENDANA, respondents.
Vicente D. Millora for petitioner.
Jacinto Callanta for private respondent.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used
bottles and scrap metal in Pangasinan. Upon gathering sufficient quantities of
such scrap material, respondent would bring such material to Manila for
resale. He utilized two (2) six-wheeler trucks which he owned for hauling the
material to Manila. On the return trip to Pangasinan, respondent would load
his vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of
Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to
petitioner's establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck driven by
respondent himself, while 600 cartons were placed on board the other truck
which was driven by Manuel Estrada, respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other
600 boxes never reached petitioner, since the truck which carried these boxes
was hijacked somewhere along the MacArthur Highway in Paniqui, Tarlac,
by armed men who took with them the truck, its driver, his helper and the
cargo.
On 6 January 1971, petitioner commenced action against private respondent
in the Court of First Instance of Pangasinan, demanding payment of P
22,150.00, the claimed value of the lost merchandise, plus damages and
attorney's fees. Petitioner argued that private respondent, being a common
carrier, and having failed to exercise the extraordinary diligence required of
him by the law, should be held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common carrier and
argued that he could not be held responsible for the value of the lost goods,
such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private
respondent to be a common carrier and holding him liable for the value of the
undelivered goods (P 22,150.00) as well as for P 4,000.00 as damages and P
2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court
had erred in considering him a common carrier; in finding that he had
habitually offered trucking services to the public; in not exempting him from
liability on the ground of force majeure; and in ordering him to pay damages
and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that
respondent had been engaged in transporting return loads of freight "as a
casual
occupation — a sideline to his scrap iron business" and not as a common
carrier. Petitioner came to this Court by way of a Petition for Review
assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure;
and
3. that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto
Cendana may, under the facts earlier set forth, be properly characterized as a
common carrier.
The Civil Code defines "common carriers" in the following terms:
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or
air for compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local Idiom
as "a sideline"). Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from a
narrow segment of the general population. We think that Article 1733
deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
... every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar
public services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other
merchants from Manila to Pangasinan, although such back-hauling was done
on a periodic or occasional rather than regular or scheduled manner, and even
though private respondent's principal occupation was not the carriage of
goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell below
commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no
certificate of public convenience, and concluded he was not a common
carrier. This is palpable error. A certificate of public convenience is not a
requisite for the incurring of liability under the Civil Code provisions
governing common carriers. That liability arises the moment a person or firm
acts as a common carrier, without regard to whether or not such carrier has
also complied with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of public
convenience or other franchise. To exempt private respondent from the
liabilities of a common carrier because he has not secured the necessary
certificate of public convenience, would be offensive to sound public policy;
that would be to reward private respondent precisely for failing to comply
with applicable statutory requirements. The business of a common carrier
impinges directly and intimately upon the safety and well being and property
of those members of the general community who happen to deal with such
carrier. The law imposes duties and liabilities upon common carriers for the
safety and protection of those who utilize their services and the law cannot
allow a common carrier to render such duties and liabilities merely
facultative by simply failing to obtain the necessary permits and
authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public
policy" 2 are held to a very high degree of care and diligence ("extraordinary
diligence") in the carriage of goods as well as of passengers. The specific
import of extraordinary diligence in the care of goods transported by a
common carrier is, according to Article 1733, "further expressed in Articles
1734,1735 and 1745, numbers 5, 6 and 7" of the Civil Code.
Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods which they
carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or
other natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner
of the goods;
(4) The character-of the goods or defects in
the packing or-in the containers; and
(5) Order or act of competent public
authority.
It is important to point out that the above list of causes of loss, destruction or
deterioration which exempt the common carrier for responsibility therefor, is
a closed list. Causes falling outside the foregoing list, even if they appear to
constitute a species of force majeure fall within the scope of Article 1735,
which provides as follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4
and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to
have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required
in Article 1733. (Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the
specific cause alleged in the instant case — the hijacking of the carrier's truck
— does not fall within any of the five (5) categories of exempting causes
listed in Article 1734. It would follow, therefore, that the hijacking of the
carrier's vehicle must be dealt with under the provisions of Article 1735, in
other words, that the private respondent as common carrier is presumed to
have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private
respondent.
Petitioner insists that private respondent had not observed extraordinary
diligence in the care of petitioner's goods. Petitioner argues that in the
circumstances of this case, private respondent should have hired a security
guard presumably to ride with the truck carrying the 600 cartons of Liberty
filled milk. We do not believe, however, that in the instant case, the standard
of extraordinary diligence required private respondent to retain a security
guard to ride with the truck and to engage brigands in a firelight at the risk of
his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of
the duty of extraordinary diligence in the vigilance over the goods carried in
the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over
goods is, under Article 1733, given additional specification not only by
Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be
responsible for the acts or omissions of his
or its employees;
(6) that the common carrier's liability for
acts committed by thieves, or of
robbers who donot act with grave or
irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of the
defective condition of the car vehicle, ship,
airplane or other equipment used in the
contract of carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible — and
will not be allowed to divest or to diminish such responsibility — even for
acts of strangers like thieves or robbers, except where such thieves or robbers
in fact acted "with grave or irresistible threat, violence or force." We believe
and so hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are lost as a
result of a robbery which is attended by "grave or irresistible threat, violence
or force."
In the instant case, armed men held up the second truck owned by private
respondent which carried petitioner's cargo. The record shows that an
information for robbery in band was filed in the Court of First Instance of
Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the
Philippines v. Felipe Boncorno, Napoleon Presno, Armando Mesina, Oscar
Oria and one John Doe." There, the accused were charged with willfully and
unlawfully taking and carrying away with them the second truck, driven by
Manuel Estrada and loaded with the 600 cartons of Liberty filled milk
destined for delivery at petitioner's store in Urdaneta, Pangasinan. The
decision of the trial court shows that the accused acted with grave, if not
irresistible, threat, violence or force.3 Three (3) of the five (5) hold-uppers
were armed with firearms. The robbers not only took away the truck and its
cargo but also kidnapped the driver and his helper, detaining them for several
days and later releasing them in another province (in Zambales). The
hijacked truck was subsequently found by the police in Quezon City. The
Court of First Instance convicted all the accused of robbery, though not of
robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must
reasonably be regarded as quite beyond the control of the common carrier
and properly regarded as a fortuitous event. It is necessary to recall that even
common carriers are not made absolute insurers against all risks of travel and
of transport of goods, and are not held liable for acts or events which cannot
be foreseen or are inevitable, provided that they shall have complied with the
rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that
private respondent Cendana is not liable for the value of the undelivered
merchandise which was lost because of an event entirely beyond private
respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED
and the Decision of the Court of Appeals dated 3 August 1977 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
[G.R. No. 125948. December 29, 1998]
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner,
vs. COURT OF APPEALS, HONORABLE PATERNO V. TAC-
AN, BATANGAS CITY and ADORACION C. ARELLANO, in
her official capacity as City Treasurer of Batangas, respondents.
DECISION
MARTINEZ, J.:
 This petition for review on certiorari assails the Decision of the Court of
Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil Case
No. 4293, which dismissed petitioners' complaint for a business tax refund
imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No.
387, as amended, to contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967[1] and renewed by the Energy
Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with
the Office of the Mayor of Batangas City. However, before the mayor's permit
could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code.[3] The respondent City Treasurer assessed a business
tax on the petitioner amounting to P956,076.04 payable in four installments
based on the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under protest in the amount of P239,019.01
for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer, the pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the Batangas refineries, via
pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is
exempt from paying tax on gross receipts under Section 133 of the Local
Government Code of 1991 x x x x
"Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax 'on contractors and other
independent contractors' under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.
"The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such amounts
as may be commensurate to the cost of regulation, inspection, and
licensing. Hence, assuming arguendo that FPIC is liable for the license fee,
the imposition thereof based on gross receipts is violative of the aforecited
provision. The amount of P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection and licensing. The fee is
already a revenue raising measure, and not a mere regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in transportation
business, thus it cannot claim exemption under Section 133 (j) of the Local
Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of
Batangas City a complaint[6] for tax refund with prayer for a writ of preliminary
injunction against respondents City of Batangas and Adoracion Arellano in her
capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that:
(1) the imposition and collection of the business tax on its gross receipts
violates Section 133 of the Local Government Code; (2) the authority of cities
to impose and collect a tax on the gross receipts of "contractors and
independent contractors" under Sec. 141 (e) and 151 does not include the
authority to collect such taxes on transportation contractors for, as defined
under Sec. 131 (h), the term "contractors" excludes transportation contractors;
and, (3) the City Treasurer illegally and erroneously imposed and collected the
said tax, thus meriting the immediate refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot
be exempt from taxes under Section 133 (j) of the Local Government Code as
said exemption applies only to "transportation contractors and persons
engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term
"common carrier" which refers solely to ordinary carriers such as trucks, trains,
ships and the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a product is
delivered to its destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the
complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a
rule that tax exemptions are to be strictly construed against the taxpayer,
taxes being the lifeblood of the government. Exemption may therefore be
granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic
Act 387, (Exhibit A) whose concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor the deed of
concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this
case (exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses
only common carriers so as not to overburden the
riding public or commuters with taxes. Plaintiff is
not a common carrier, but a special carrier extending
its services and facilities to a single specific or
"special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give
more and effective local autonomy to local
governments than the previous enactments, to make
them economically and financially viable to serve
the people and discharge their functions with a
concomitant obligation to accept certain devolution
of powers, x x x So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and
contractors are also taxed under Sec. 143 (e) and 151
of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition
for review. On February 27, 1995, we referred the case to the respondent Court
of Appeals for consideration and adjudication.[10] On November 29, 1995, the
respondent court rendered a decision[11] affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was denied on
July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996.[13] Petitioner moved for a
reconsideration which was granted by this Court in a Resolution[14] of January
20, 1997. Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding
that (1) the petitioner is not a common carrier or a transportation contractor,
and (2) the exemption sought for by petitioner is not clear under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself
out to the public as engaged in the business of transporting persons or property
from place to place, for compensation, offering his services to the public
generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others
as a public employment, and must hold himself out as ready
to engage in the transportation of goods for person generally
as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his
business is confined;
3. He must undertake to carry by the method by which his business
is conducted and over his established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that
petitioner is a common carrier. It is engaged in the business of transporting or
carrying goods, i.e. petroleum products, for hire as a public employment. It
undertakes to carry for all persons indifferently, that is, to all persons who
choose to employ its services, and transports the goods by land and for
compensation. The fact that petitioner has a limited clientele does not exclude
it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or both,
and one who does such carrying only as an ancillary activity (in local idiom,
as a 'sideline'). Article 1732 x x x avoids making any distinction between a
person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the 'general public,' i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1877 deliberately refrained from making such
distinctions.
So understood, the concept of 'common carrier' under Article 1732 may be
seen to coincide neatly with the notion of 'public service,' under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, 'public
service' includes:
'every person that now or hereafter may own, operate, manage, or control in
the Philippines, for hire or compensation, with general or limited clientele,
whether permanent, occasional or accidental, and done for general business
purposes, any common carrier, railroad, street railway, traction railway,
subway motor vehicle, either for freight or passenger, or both, with or
without fixed route and whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice-
refrigeration plant, canal, irrigation system gas, electric light heat and power,
water supply and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations and other
similar public services.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common carriers
transporting goods and passengers through moving vehicles or vessels either
by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means of transporting,
as long as it is by land, water or air. It does not provide that the transportation
of the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner
is considered a "common carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum
as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof provides:
"that everything relating to the exploration for and exploitation of petroleum
x x and everything relating to the manufacture, refining, storage,
or transportation by special methods of petroleum, is hereby declared to
be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a
"common carrier." In BIR Ruling No. 069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in
transporting petroleum products, it is considered a common carrier under
Republic Act No. 387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a
"common carrier" and, therefore, exempt from the business tax as provided for
in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local
Government Units. - Unless otherwise provided herein, the exercise of the
taxing powers of provinces, cities, municipalities, and barangays shall not
extend to the levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or
freight by hire and common carriers by air, land or water,
except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker. Petitioner is already paying three (3%) percent common carrier's tax on
its gross sales/earnings under the National Internal Revenue Code.[19] To tax
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 petitioner again on its gross receipts in its transportation of petroleum business
[now Sec. 131]. Common Limitations on the Taxing Powers of Local would defeat the purpose of the Local Government Code.
Government Units." x x x
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
MR. AQUINO (A.). Thank you Mr. Speaker. 36801 is REVERSED and SET ASIDE.

Still on page 95, subparagraph 5, on taxes on the business of SO ORDERED.

transportation. This appears to be one of those being deemed to be exempted
from the taxing powers of the local government units. May we know the
reason why the transportation business is being excluded from the
G.R. No. 148496 March 19, 2002
taxing powers of the local government units?
VIRGINES CALVO doing business under the name and style
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section
TRANSORIENT CONTAINER TERMINAL SERVICES,
121 (now Sec. 131), line 16, paragraph 5. It states that local government units
INC., petitioner,
may not impose taxes on the business of transportation, except as otherwise
vs.
provided in this code.
UCPB GENERAL INSURANCE CO., INC. (formerly Allied Guarantee
Ins. Co., Inc.) respondent.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on business
MENDOZA, J.:
enjoying a franchise at the rate of not more than one-half of 1 percent of the
gross annual receipts. So, transportation contractors who are enjoying a
franchise would be subject to tax by the province. That is the exception, Mr. This is a petition for review of the decision,1 dated May 31, 2001, of the
Speaker. Court of Appeals, affirming the decision2of the Regional Trial Court, Makati
City, Branch 148, which ordered petitioner to pay respondent, as subrogee,
the amount of P93,112.00 with legal interest, representing the value of
What we want to guard against here, Mr. Speaker, is the imposition of
damaged cargo handled by petitioner, 25% thereof as attorney's fees, and the
taxes by local government units on the carrier business. Local
cost of the suit.1âwphi1.nêt
government units may impose taxes on top of what is already being imposed
by the National Internal Revenue Code which is the so-called "common
carriers tax." We do not want a duplication of this tax, so we just The facts are as follows:
provided for an exception under Section 125 [now Sec. 137] that a province
may impose this tax at a specific rate. Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x material to this case, petitioner entered into a contract with San Miguel
x[18] Corporation (SMC) for the transfer of 114 reels of semi-chemical fluting
paper and 124 reels of kraft liner board from the Port Area in Manila to
SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita,
It is clear that the legislative intent in excluding from the taxing power of
Manila. The cargo was insured by respondent UCPB General Insurance Co.,
the local government unit the imposition of business tax against common
Inc.
carriers is to prevent a duplication of the so-called "common carrier's tax."
On July 14, 1990, the shipment in question, contained in 30 metal vans,
arrived in Manila on board "M/V Hayakawa Maru" and, after 24 hours, were
unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her
contract with SMC, withdrew the cargo from the arrastre operator and
delivered it to SMC's warehouse in Ermita, Manila. On July 25, 1990, the
goods were inspected by Marine Cargo Surveyors, who found that 15 reels of
the semi-chemical fluting paper were "wet/stained/torn" and 3 reels of kraft
liner board were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance contract
for the aforementioned amount. In turn, respondent, as subrogee of SMC,
brought suit against petitioner in the Regional Trial Court, Branch 148,
Makati City, which, on December 20, 1995, rendered judgment finding
petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage
while in the custody of defendants. Evidence such as the Warehouse
Entry Slip (Exh. "E"); the Damage Report (Exh. "F") with entries
appearing therein, classified as "TED" and "TSN", which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end
and tearrage at the middle of the subject damaged cargoes
respectively, coupled with the Marine Cargo Survey Report (Exh.
"H" - "H-4-A") confirms the fact of the damaged condition of the
subject cargoes. The surveyor[s'] report (Exh. "H-4-A") in particular,
which provides among others that:
" . . . we opine that damages sustained by shipment is
attributable to improper handling in transit presumably
whilst in the custody of the broker . . . ."
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain
[her] defense that [she is] are not liable. Defendant by reason of the
nature of [her] business should have devised ways and means in
order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the
consignee. Defendant did not present any evidence on what
precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she]
shall perform such extraordinary diligence because of the nature of
the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the
goods are proved to have been lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff,
therefore, is to prove merely that the goods he transported have been
lost, destroyed or deteriorated. Thereafter, the burden is shifted to the
carrier to prove that he has exercised the extraordinary diligence
required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the
place of destination in bad order, makes out a prima facie case
against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability." (cited in
Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV,
1989 Ed.)
Defendant, being a customs brother, warehouseman and at the same
time a common carrier is supposed [to] exercise [the] extraordinary
diligence required by law, hence the extraordinary responsibility
lasts from the time the goods are unconditionally placed in the
possession of and received by the carrier for transportation until the
same are delivered actually or constructively by the carrier to the
consignee or to the person who has the right to receive the same.3
Accordingly, the trial court ordered petitioner to pay the following amounts -
-
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyer's fee;
3. Costs of suit.4
The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR [IN] DECIDING THE CASE NOT ON
THE EVIDENCE PRESENTED BUT ON PURE SURMISES,
SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND
REVERSIBLE ERROR IN CLASSIFYING THE PETITIONER AS
A COMMON CARRIER AND NOT AS PRIVATE OR SPECIAL
CARRIER WHO DID NOT HOLD ITS SERVICES TO THE
PUBLIC.5
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court
of Appeals held otherwise, then she is indeed not liable beyond what
ordinary diligence in the vigilance over the goods transported by her, would
require.6 Consequently, any damage to the cargo she agrees to transport
cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the
Court of Appeals, she is not a common carrier but a private carrier because,
as a customs broker and warehouseman, she does not indiscriminately hold
her services out to the public but only offers the same to select parties with
whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals,7 the Court
dismissed a similar contention and held the party to be a common carrier,
thus -
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
There is greater reason for holding petitioner to be a common carrier because
offering their services to the public."
the transportation of goods is an integral part of her business. To uphold
petitioner's contention would be to deprive those with whom she contracts
the protection which the law affords them notwithstanding the fact that the
The above article makes no distinction between one
whose principal business activity is the carrying of persons or goods
or both, and one who does such carrying only as an ancillary activity
. . . Article 1732 also carefully avoids making any distinction
between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one
who offers services or solicits business only from a
narrow segment of the general population. We think that Article
1732 deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
" x x x every person that now or hereafter may own, operate,
manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether
permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street
railway, traction railway, subway motor vehicle, either for
freight or passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier service
of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant, ice-refrigeration
plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system,
wire or wireless communications systems, wire or wireless
broadcasting stations and other similar public services. x x
x" 8
obligation to carry goods for her customers, as already noted, is part and
parcel of petitioner's business.
Now, as to petitioner's liability, Art. 1733 of the Civil Code provides:
Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
...
In Compania Maritima v. Court of Appeals,9 the meaning of "extraordinary
diligence in the vigilance over goods" was explained thus:
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires."
In the case at bar, petitioner denies liability for the damage to the cargo. She
claims that the "spoilage or wettage" took place while the goods were in the
custody of either the carrying vessel "M/V Hayakawa Maru," which
transported the cargo to Manila, or the arrastre operator, to whom the goods
were unloaded and who allegedly kept them in open air for nine days from
July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door
distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of
water soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly
10
detached loosened.
In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino
testified that he has no personal knowledge on whether the container vans
were first stored in petitioner's warehouse prior to their delivery to the
consignee. She likewise claims that after withdrawing the container vans
from the arrastre operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMC's warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the
damage to the cargo could not have taken place while these were in her
custody.11
Contrary to petitioner's assertion, the Survey Report (Exh. H) of the Marine
Cargo Surveyors indicates that when the shipper transferred the cargo in
question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioner's employees withdrew the
cargo from the arrastre operator, they did so without exception or protest
either with regard to the condition of container vans or their contents. The
Survey Report pertinently reads --
Details of Discharge:
Shipment, provided with our protective supervision was noted
discharged ex vessel to dock of Pier #13 South Harbor, Manila on 14
July 1990, containerized onto 30' x 20' secure metal vans, covered by
clean EIRs. Except for slight dents and paint scratches on side and
roof panels, these containers were deemed to have [been] received in
good condition.
....
Transfer/Delivery:
 On July 23, 1990, shipment housed onto 30' x 20' cargo containers
was [withdrawn] by Transorient Container Services, Inc. . . . without
exception.
[The cargo] was finally delivered to the consignee's storage
warehouse located at Tabacalera Compound, Romualdez Street,
Ermita, Manila from July 23/25, 1990.12
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was
discharged from the vessel to the arrastre, Marina Port Services Inc.,
in good order and condition as evidenced by clean Equipment
Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the
arrastre operator. The cargoes were withdrawn by the defendant-
appellant from the arrastre still in good order and condition as the
same were received by the former without exception, that is, without
any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant
would report it immediately to the consignee or make an exception
on the delivery receipt or note the same in the Warehouse Entry Slip
(WES). None of these took place. To put it simply, the defendant-
appellant received the shipment in good order and condition and
delivered the same to the consignee damaged. We can only conclude
that the damages to the cargo occurred while it was in the possession
of the defendant-appellant. Whenever the thing is lost (or damaged)
in the possession of the debtor (or obligor), it shall be presumed that
the loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case
of loss or damage to the goods.13
Anent petitioner's insistence that the cargo could not have been damaged
while in her custody as she immediately delivered the containers to SMC's
compound, suffice it to say that to prove the exercise of extraordinary
diligence, petitioner must do more than merely show the possibility that
some other party could be responsible for the damage. It must prove that it
used "all reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling
[thereof]." Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides --
Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
....
(4) The character of the goods or defects in the packing or in the
containers.
....
For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom.14 In
this case, petitioner accepted the cargo without exception despite the
apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage
of goods in this case or that she is exempt from liability, the presumption of
negligence as provided under Art. 173515 holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.1âwphi1.nêt
SO ORDERED.
G.R. No. 147079 December 21, 2004
A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
DECISION

CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate court’s
Decision1 of August 10, 2000 reversing and setting aside the judgment of
Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B
which dismissed the complaint of respondent FGU Insurance Corporation
(FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of
KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives
consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets
and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.2The Femenal tablets were placed
in 124 cartons and the Nordiol tablets were placed in 20 cartons which were
packed together in one (1) LD3 aluminum container, while the Trinordial
tablets were packed in two pallets, each of which contained 30 cartons.3
Wyeth-Suaco insured the shipment against all risks with FGU Insurance
which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy
No. 138.4
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino
International Airport (NAIA),5 it was discharged "without exception"6 and
delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located
also at the NAIA for safekeeping.7
In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which
had been its licensed broker since 1984.8 As its customs broker, Sanchez
Brokerage calculates and pays the customs duties, taxes and storage fees for
the cargo and thereafter delivers it to Wyeth-Suaco.9
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of
Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt
for which, Official Receipt No. 016992,10 was issued. On the receipt, another
representative of Sanchez Brokerage, M. Sison,11 acknowledged that he
received the cargoes consisting of three pieces in good condition.12
Wyeth-Suaco being a regular importer, the customs examiner did not inspect
the cargoes13 which were thereupon stripped from the aluminum
containers14 and loaded inside two transport vehicles hired by Sanchez
Brokerage.15
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,16 employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor
and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of
FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check.17 The delivery
receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal and Nordiol and 1
pallet containing Trinordiol.18
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
acknowledged the delivery of the cargoes by affixing his signature on the
delivery receipt.19 Upon inspection, however, he, together with Ruben
Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal
and Nordiol tablets were in bad order.20 He thus placed a note above his
signature on the delivery receipt stating that 44 cartons of oral contraceptives
were in bad order. The remaining 160 cartons of oral contraceptives were
accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report21 dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3
cartons of Nordiol tablets were "wetted" (sic).22
The Elite Surveyors later issued Certificate No. CS-0731-1538/9223 attached
to which was an "Annexed Schedule" whereon it was indicated that prior to
the loading of the cargoes to the broker’s trucks at the NAIA, they were
inspected and found to be in "apparent good condition."24 Also noted was that
at the time of delivery to the warehouse of Hizon Laboratories Inc., slight to
heavy rains fell, which could account for the wetting of the 44 cartons of
Femenal and Nordiol tablets.25
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report26 confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700
blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets
were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection27 of
38 cartons of Femenal and 3 cartons of Nordiol on the ground that they were
"delivered to Hizon Laboratories with heavy water damaged (sic) causing the
cartons to sagged (sic) emitting a foul order and easily attracted flies."28
Wyeth-Suaco later demanded, by letter29 of August 25, 1992, from Sanchez
Brokerage the payment of P191,384.25 representing the value of its loss
arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount
of P181,431.49 in settlement of its claim under Marine Risk Note Number
4995.
Wyeth-Suaco thus issued Subrogation Receipt30 in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it
paid Wyeth-Suaco, Sanchez Brokerage, by letter31 of January 7, 1993,
disclaimed liability for the damaged goods, positing that the damage was due
to improper and insufficient export packaging; that when the sealed
containers were opened outside the PSI warehouse, it was discovered that
some of the loose cartons were wet,32 prompting its (Sanchez Brokerage’s)
representative Morales to inform the Import-Export Assistant of Wyeth-
Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter
advised to still deliver them to Hizon Laboratories where an adjuster would
assess the damage.33
Hence, the filing by FGU Insurance of a complaint for damages before the
Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision34 of July 29, 1996, dismissed the complaint,
holding that the Survey Report prepared by the Elite Surveyors is bereft of
any evidentiary support and a mere product of pure guesswork.35
On appeal, the appellate court reversed the decision of the trial court, it
holding that the Sanchez Brokerage engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo of
its clients, hence, a common carrier within the context of Article 1732 of the
New Civil Code.36
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered
to petitioner in good order and condition but were in a damaged state when
delivered to Wyeth-Suaco, the appellate court held that Sanchez Brokerage
is presumed negligent and upon it rested the burden of proving that it
exercised extraordinary negligence not only in instances when negligence is
directly proven but also in those cases when the cause of the damage is not
known or unknown.37
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the
Appellant is GRANTED. The Decision of the Court a quo is
REVERSED. Another Decision is hereby rendered in favor of the
Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the
principal amount of P181, 431.49, with interest thereupon at
the rate of 6% per annum, from the date of the Decision of
the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the
amount of P20,000.00 as and by way of attorney’s fees; and
3. The counterclaims of the Appellee are DISMISSED.38
Sanchez Brokerage’s Motion for Reconsideration having been denied by the
appellate court’s Resolution of December 8, 2000 which was received by
petitioner on January 5, 2001, it comes to this Court on petition for certiorari
filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a
"common carrier" within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of
action which petitioner should have taken was to file a petition for review on
certiorari since the sole office of a writ of certiorari is the correction of errors
of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction and does not include correction of
the appellate court’s evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a
common carrier, failed to overcome the presumption of negligence, it being
documented that petitioner withdrew from the warehouse of PSI the subject
shipment entirely in good order and condition.39
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or proceedings
involved, may be appealed to this Court by filing a petition for review, which
would be but a continuation of the appellate process over the original case.40
The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received
by petitioner on January 5, 2001. Since petitioner failed to appeal within 15
days or on or before January 20, 2001, the appellate court’s decision had
become final and executory. The filing by petitioner of a petition for
certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of
appeal.
In another vein, the rule is well settled that in a petition for certiorari, the
petitioner must prove not merely reversible error but also grave abuse of
discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside
the decision of the trial court based on its finding that petitioner is liable for
the damage to the cargo as a common carrier. What petitioner is ascribing is
an error of judgment, not of jurisdiction, which is properly the subject of an
ordinary appeal.
Where the issue or question involves or affects the wisdom or legal
soundness of the decision – not the jurisdiction of the court to render said
decision – the same is beyond the province of a petition for certiorari.41 The
supervisory jurisdiction of this Court to issue a cert writ cannot be exercised
in order to review the judgment of lower courts as to its intrinsic correctness,
either upon the law or the facts of the case.42
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be
also a common carrier, as defined under Article 1732 of the Civil Code, to
wit:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs
broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in
cargos, and those upon approval of the importer, we prepare the
entry together for processing and claims from customs and
finally deliver the goods to the warehouse of the importer.43
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity.44 The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under
Article 173345 of the Civil Code, extraordinary diligence in the vigilance over
the goods it transports according to all the circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to have
been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.46
The concept of "extra-ordinary diligence" was explained in Compania
Maritima v. Court of Appeals:47
The extraordinary diligence in the vigilance over the goods tendered
for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and
foresight and "to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their
nature requires."48
In the case at bar, it was established that petitioner received the cargoes from
the PSI warehouse in NAIA in good order and condition;49 and that upon
delivery by petitioner to Hizon Laboratories Inc., some of the cargoes were
found to be in bad order, as noted in the Delivery Receipt50 issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors51 and the
Destruction Report of Hizon Laboratories, Inc.52
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the
shipper for failing to properly pack them and to the inherent characteristics of
the goods53 ; and that it should not be faulted for following the instructions of
Calicdan of Wyeth-Suaco to proceed with the delivery despite information
conveyed to the latter that some of the cartons, on examination outside the
PSI warehouse, were found to be wet.54
While paragraph No. 4 of Article 173455 of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the character of
the goods or defects in the packing or in the containers, the rule is that if the
improper packing is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage.56
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo
under protest or with reservations duly noted on the receipt issued by PSI.
But it made no such protest or reservation.57
Moreover, as observed by the appellate court, if indeed petitioner’s
employees only examined the cargoes outside the PSI warehouse and found
some to be wet, they would certainly have gone back to PSI, showed to the
warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.58 Or, petitioner would
have presented, as witness, the employees of the PSI from whom Morales
and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened
outside the warehouse.59
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no
rain fell that day. Instead, it asserts that some of the cargoes were already wet
on delivery by PSI outside the PSI warehouse but such notwithstanding
Calicdan directed Morales to proceed with the delivery to Hizon
Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of
Morales on July 29, 1992, he failed to specifically declare what time he
received the call. As to whether the call was made at the PSI warehouse
when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside from
that phone call, petitioner admitted that it had no documentary evidence to
prove that at the time it received the cargoes, a part of it was wet, damaged or
in bad condition.60
The 4-page weather data furnished by PAGASA61 on request of Sanchez
Brokerage hardly impresses, no witness having identified it and interpreted
the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc.,
the oral contraceptives were damaged by rainwater while in transit to
Antipolo City is more likely then. Sanchez himself testified that in the past,
there was a similar instance when the shipment of Wyeth-Suaco was also
found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral
contraceptives, that arrived at the NAIA were damaged and claimed
by the Wyeth-Suaco without any question?
 WITNESS: DECISION
CARPIO-MORALES, J.:
A: Yes sir, there was an instance that one cartoon (sic) were wetted
(sic) but Wyeth-Suaco did not claim anything against us.
On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as
as its Resolution[2] dated September 28, 2001 denying the motion for reconsideration, w
ATTY. FLORES:
affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case
92-63132[3] holding petitioner Schmitz Transport Brokerage Corporation (Sch
Q: HOW IS IT? Transport), together with Black Sea Shipping Corporation (Black Sea), represented b
ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solid
WITNESS: liable for the loss of 37 hot rolled steel sheets in coil that were washed overboard a bar

A: We experienced, there was a time that we experienced that there On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the por
was a cartoon (sic) wetted (sic) up to the bottom are wet specially Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel of Russian registry
during rainy season.62 owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric ton
The cargoes, which were to be discharged at the port of Manila in favor of
Since petitioner received all the cargoes in good order and condition at the consignee, Little Giant Steel Pipe Corporation (Little Giant),[4] were insured against all
time they were turned over by the PSI warehouseman, and upon their with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No
delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad 91-3747-TIS.[5]
order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its The vessel arrived at the port of Manila on October 24, 1991 and the Philippine P
presumed negligence under Article 1735 of the Civil Code remains Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila S
unrebutted. Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requ
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is clearances, to receive the cargoes from the shipside, and to deliver them to its
hereby AFFIRMED. consignees) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to se
barge and tugboat at shipside.
Costs against petitioner.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Eri
SO ORDERED. to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the b
alongside the vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre ope
Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the v
[G.R. No. 150255. April 22, 2005] unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had bec
inclement due to an approaching storm, the unloading unto the barge of the 37 coils
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, accomplished.[10] No tugboat pulled the barge back to the pier, however.
vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE [11]
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL nowAt around 5:30 a.m. of October 27, 1991, due to strong waves, the crew of the b
INCHCAPE SHIPPING SERVICES, respondents. abandoned it and transferred to the vessel. The barge pitched and rolled with the waves
eventually capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat fin
arrived to pull the already empty and damaged barge back to the pier.[13]
 Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance
have happened and so much so that the person principally liable cannot be distingui
to recover the lost cargoes proved futile.[14] with sufficient accuracy.[25]
Little Giant thus filed a formal claim against Industrial Insurance which paid it theIn discrediting the defense of fortuitous event, the appellate court held that altho
amount of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15] in favor
defendants obviously had nothing to do with the force of nature, they however had co
of Industrial Insurance. of where to anchor the vessel, where discharge will take place and even when
discharging will commence.[26]
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black
Sea through its representative Inchcape (the defendants) before the RTC of Manila, for theThe defendants respective motions for reconsideration having been denied
[27]
recovery of the amount it paid to Little Giant plus adjustment fees, attorneys fees,Resolution
and of September 28, 2001, Schmitz Transport (hereinafter referred t
[16]
litigation expenses. petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.
Industrial Insurance faulted the defendants for undertaking the unloading of thePetitioner asserts that in chartering the barge and tugboat of TVI, it was acting fo
cargoes while typhoon signal No. 1 was raised in Metro Manila.[17] principal, consignee Little Giant, hence, the transportation contract was by and betw
Little Giant and TVI.[28]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants
negligent for unloading the cargoes outside of the breakwater notwithstanding the stormBy Resolution of January 23, 2002, herein respondents Industrial Insurance, Black
signal.[18] The dispositive portion of the decision reads: and TVI were required to file their respective Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the consi
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff,
through petitioner in good order, hence, it cannot be faulted, it having had no control
ordering the defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with
supervision thereover.[30]
interest from the date the complaint was filed until fully satisfied, as well as the sum
of P5,000.00 representing the adjustment fee plus the sum of 20% of the amount recoverableFor its part, TVI maintained that it acted as a passive party as it merely received
cargoes and transferred them unto the barge upon the instruction of petitioner.[31]
from the defendants as attorneys fees plus the costs of suit. The counterclaims and cross
[19]
claims of defendants are hereby DISMISSED for lack of [m]erit.
In issue then are:
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint(1) Whether the loss of the cargoes was due to a fortuitous event, independent of
motion for reconsideration assailing the finding that they are common carriers and the award
act of negligence on the part of petitioner Black Sea and TVI, and
of excessive attorneys fees of more than P1,000,000. And they argued that they were not
motivated by gross or evident bad faith and that the incident was caused by a fortuitous(2) If there was negligence, whether liability for the loss may attach to Black
event. [20] petitioner and TVI.

By resolution of February 4, 1998, the trial court denied the motion forWhen a fortuitous event occurs, Article 1174 of the Civil Code absolves any party
reconsideration. [21] any and all liability arising therefrom:

All the defendants appealed to the Court of Appeals which, by decision of JuneART. 27, 1174. Except in cases expressly specified by the law, or when it is otherwise decl
2001, affirmed in toto the decision of the trial court, [22] it finding that all the defendants
by stipulation, or when the nature of the obligation requires the assumption of risk
were common carriers Black Sea and TVI for engaging in the transport of goods and cargoes person shall be responsible for those events which could not be foreseen, or which tho
over the seas as a regular business and not as an isolated transaction,[23] and Schmitz foreseen, were inevitable.
Transport for entering into a contract with Little Giant to transport the cargoes from ship to
port for a fee.[24] In order, to be considered a fortuitous event, however, (1) the cause of the unfore
and
In holding all the defendants solidarily liable, the appellate court ruled that each one unexpected occurrence, or the failure of the debtor to comply with his obligation,
was essential such that without each others contributory negligence the incident would notbe independent of human will; (2) it must be impossible to foresee the event w
constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3
occurrence must be such as to render it impossible for the debtor to fulfill his obligationcourt
in put it, as long as a person or corporation holds [itself] to the public for the purpo
any manner; and (4) the obligor must be free from any participation in the aggravation transporting
of goods as [a] business, [it] is already considered a common carrier regardle
the injury resulting to the creditor.[32] [it] owns the vehicle to be used or has to hire one.[42] That petitioner is a common car
the testimony of its own Vice-President and General Manager Noel Aro that part o
[T]he principle embodied in the act of God doctrine strictly requires that the act must services
be it offers to its clients as a brokerage firm includes the transportation of car
occasioned solely by the violence of nature. Human intervention is to be excluded from reflects so.
creating or entering into the cause of the mischief. When the effect is found to be in part the
Atty. Jubay: Will you please tell us what [are you] functions x x x as Execu
result of the participation of man, whether due to his active intervention or neglect or failure
Vice-President and General Manager of said Company?
to act, the whole occurrence is then humanized and removed from the rules applicable to
the acts of God.[33] Mr. Aro: Well, I oversee the entire operation of the brokerage and trans
business of the company. I also handle the various division heads of
The appellate court, in affirming the finding of the trial court that human intervention company for operation matters, and all other related functions that
in the form of contributory negligence by all the defendants resulted to the loss of the President may assign to me from time to time, Sir.
[34]
cargoes, held that unloading outside the breakwater, instead of inside the breakwater,
Q: Now, in connection [with] your duties and functions as you mentioned,
while a storm signal was up constitutes negligence.[35] It thus concluded that the proximate
you please tell the Honorable Court if you came to know the company b
cause of the loss was Black Seas negligence in deciding to unload the cargoes at an unsafe
[36] name Little Giant Steel Pipe Corporation?
place and while a typhoon was approaching.
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
From a review of the records of the case, there is no indication that there was greater
risk in loading the cargoes outside the breakwater. As the defendants proffered, the weather Q: And since when have you been the brokerage firm of that company, if you
on October 26, 1991 remained normal with moderate sea condition such that port operations recall?
continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the Climate A: DataSince 1990, Sir.
Section of PAG-ASA and marked as a common exhibit of the parties, states that while
typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea Q: Now, you said that you are the brokerage firm of this Company. What wo
condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. duty did you perform in behalf of this company?
It cannot, therefore, be said that the defendants were negligent in not unloading the cargoes A: We handled the releases (sic) of their cargo[es] from the Burea
upon the barge on October 26, 1991 inside the breakwater. Customs. We [are] also in-charged of the delivery of the goods to
That no tugboat towed back the barge to the pier after the cargoes were completely warehouses. We also handled the clearances of their shipment at the Bu
loaded by 12:30 in the morning[39] is, however, a material fact which the appellate court of Customs, Sir.
failed to properly consider and appreciate[40] the proximate cause of the loss of the cargoes.
Had the barge been towed back promptly to the pier, the deteriorating sea conditions xxx
notwithstanding, the loss could have been avoided. But the barge was left floating in open
sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.[41] The loss Q: Now, what precisely [was] your agreement with this Little Giant Steel
thus falls outside the act of God doctrine. Corporation with regards to this shipment? What work did you do with
shipment?
The proximate cause of the loss having been determined, who among the parties is/are
responsible therefor? A: We handled the unloading of the cargo[es] from vessel to lighter and then
delivery of [the] cargo[es] from lighter to BASECO then to the truck an
Contrary to petitioners insistence, this Court, as did the appellate court, finds that the warehouse, Sir.
petitioner is a common carrier. For it undertook to transport the cargoes from the shipside
of M/V Alexander Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate
 Q: Now, in connection with this work which you are doing, Mr. Witness, youdocuments
are as required by law is bereft of merit. It suffices that petitioner undertake
supposed to perform, what equipment do (sic) you require or did you use in the goods for pecuniary consideration.[45]
deliver
order to effect this unloading, transfer and delivery to the warehouse?
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as
A: Actually, we used the barges for the ship side operations, this unloading [from]
transportation of goods is an integral part of a customs broker, the customs broker is a
vessel to lighter, and on this we hired or we sub-contracted with [T]ransport
common carrier. For to declare otherwise would be to deprive those with whom
Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in BASECO
contracts the protection which the law affords them notwithstanding the fact that
compound we are leasing cranes to have the cargo unloaded from the barge
obligation to carry goods for [its] customers, is part and parcel of petitioners business.
to trucks, [and] then we used trucks to deliver [the cargoes] to the consignees
warehouse, Sir. As for petitioners argument that being the agent of Little Giant, any negligen
committed was deemed the negligence of its principal, it does not persuade.
Q: And whose trucks do you use from BASECO compound to the consignees
warehouse? True, petitioner was the broker-agent of Little Giant in securing the release o
cargoes. In effecting the transportation of the cargoes from the shipside and into L
A: We utilized of (sic) our own trucks and we have some other contracted trucks,
Giants warehouse, however, petitioner was discharging its own personal obligation un
Sir.
contact of carriage.
xxx Petitioner, which did not have any barge or tugboat, engaged the services of TV
handler[48] to provide the barge and the tugboat. In their Service Contract,[49] while L
ATTY. JUBAY: Will you please explain to us, to the Honorable Court whyGiant is it was named as the consignee, petitioner did not disclose that it was acting
commission
you have to contract for the barges of Transport Ventures Incorporated in this and was chartering the vessel for Little Giant.[50] Little Giant did not
particular operation? automatically become a party to the Service Contract and was not, therefore, bound by
terms and conditions therein.
A: Firstly, we dont own any barges. That is why we hired the services of another
firm whom we know [al]ready for quite sometime, which is TransportNot being a party to the service contract, Little Giant cannot directly sue TVI b
Ventures, Inc. (Emphasis supplied)[43] thereon but it can maintain a cause of action for negligence.[51]
It is settled that under a given set of facts, a customs broker may be regarded as aIn the case of TVI, while it acted as a private carrier for which it was under no du
observe extraordinary diligence, it was still required to observe ordinary diligence to en
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court
[44]
of Appeals, held: the proper and careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
The appellate court did not err in finding petitioner, a customs broker, to be also a common
carrier, as defined under Article 1732 of the Civil Code, to wit,
ART. 1170. Those who in the performance of their obligations are guilty of fr
negligence, or delay, and those who in any manner contravene the tenor thereof, are l
Art. 1732. Common carriers are persons, corporations, firms or associations engaged inforthe damages.
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
ART. 1173. The fault or negligence of the obligor consists in the omission of that dilig
which is required by the nature of the obligation and corresponds with the circumstanc
xxx the persons, of the time and of the place. When negligence shows bad faith, the provis
of articles 1171 and 2202, paragraph 2, shall apply.
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. IfThe the law or contract does not state the diligence which is to be observed in the performa
contention, therefore, of petitioner that it is not a common carrier but a customs brokerthat which is expected of a good father of a family shall be required.
whose principal function is to prepare the correct customs declaration and proper shipping
 Was the reasonable care and caution which an ordinarily prudent person would of
have
a quasi-delictual liability had no contract existed between the parties, the contract ca
used in the same situation exercised by TVI?[52] said to have been breached by tort, thereby allowing the rules on tort to apply.[57]
This Court holds not.
As for Black Sea, its duty as a common carrier extended only from the time the g
TVIs failure to promptly provide a tugboat did not only increase the risk that might were surrendered or unconditionally placed in its possession and received for transporta
have been reasonably anticipated during the shipside operation, but was the proximate until they were delivered actually or constructively to consignee Little Giant.[58]
cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge
Parties to a contract of carriage may, however, agree upon a definition of delivery
floating for a considerable number of hours, at such a precarious time, and in the open sea,
extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2 cove
knowing that the barge does not have any power of its own and is totally defenseless from
the shipment provides that delivery be made to the port of discharge or so near there
the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a
she may safely get, always afloat.[59] The delivery of the goods to the consignee was
tugboat would be charging overtime pay did not excuse TVI from calling for one such
from pier to pier but from the shipside of M/V Alexander Saveliev and into barges
tugboat.
which reason the consignee contracted the services of petitioner. Since Black Sea
As for petitioner, for it to be relieved of liability, it should, following Article 1739[53]
constructively
of delivered the cargoes to Little Giant, through petitioner, it had discharge
the Civil Code, prove that it exercised due diligence to prevent or minimize the loss, before, duty.[60]
during and after the occurrence of the storm in order that it may be exempted from liability
In fine, no liability may thus attach to Black Sea.
for the loss of the goods.
Respecting the award of attorneys fees in an amount over P1,000,000.00 to Indus
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-
Insurance, for lack of factual and legal basis, this Court sets it aside. While Indus
check the operations of TVI, it failed to take all available and reasonable precautions to
Insurance was compelled to litigate its rights, such fact by itself does not justify the aw
avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge
of attorneys fees under Article 2208 of the Civil Code. For no sufficient showing of
despite the deteriorating sea conditions, it should have summoned the same or another
faith would be reflected in a partys persistence in a case other than an erroneous convic
tugboat to extend help, but it did not.
of the righteousness of his cause.[61] To award attorneys fees to a party just because
[56]
This Court holds then that petitioner and TVI are solidarily liable for the loss of judgment
the is rendered in its favor would be tantamount to imposing a premium on ones
cargoes. The following pronouncement of the Supreme Court is instructive: to litigate or seek judicial redress of legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of divers w
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify
incurred by Industrial Insurance in its voluntary but unsuccessful efforts to locate
the victim arises from the breach of that contract by reason of its failure to exercise theretrieve
high the lost cargo. They do not constitute actual damages.[63]
diligence required of the common carrier. In the discharge of its commitment to ensure the
safety of passengers, a carrier may choose to hire its own employees or avail itself of the As for the court a quos award of interest on the amount claimed, the same call
services of an outsider or an independent firm to undertake the task. In either case,modification
the following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[64
common carrier is not relieved of its responsibilities under the contract of carriage. when the demand cannot be reasonably established at the time the demand is made
interest shall begin to run not from the time the claim is made judicially or extrajudic
but from the date the judgment of the court is made (at which the time the quantificatio
Should Prudent be made likewise liable? If at all, that liability could only be for tort under
the provisions of Article 2176 and related provisions, in conjunction with Article 2180 damages
of may be deemed to have been reasonably ascertained).[65]
the Civil Code. x x x [O]ne might ask further, how then must the liability of the common
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Trans
carrier, on one hand, and an independent contractor, on the other hand, be described? It
& Brokerage Corporation, and Transport Venture Incorporation jointly and severally l
would be solidary. A contractual obligation can be breached by tort and when the same act
for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX PERC
or omission causes the injury, one resulting in culpa contractual and the other in culpa
per annum of the amount due should be computed from the promulgation on Novembe
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise
1997 of the decision of the trial court.
even under a contract, where tort is that which breaches the contract. Stated differently,
when an act which constitutes a breach of contract would have itself constituted the sourceCosts against petitioner.
 SO ORDERED.
[G.R. No. 161833. July 8, 2005]
PHILIPPINE CHARTER INSURANCE CORPORATION, petitioner,
vs. UNKNOWN OWNER OF THE VESSEL M/V NATIONAL
HONOR, NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER
SERVICES, INC., respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review under Rule 45 of the 1997 Revised Rules of
Civil Procedure assailing the Decision[1] dated January 19, 2004 of the Court
of Appeals (CA) in CA-G.R. CV No. 57357 which affirmed the Decision dated
February 17, 1997 of the Regional Trial Court (RTC) of Manila, Branch 37, in
Civil Case No. 95-73338.
The Antecedent
On November 5, 1995, J. Trading Co. Ltd. of Seoul, Korea, loaded a
shipment of four units of parts and accessories in the port of Pusan, Korea, on
board the vessel M/V National Honor,represented in the Philippines by its
agent, National Shipping Corporation of the Philippines (NSCP). The
shipment was for delivery to Manila, Philippines. Freight forwarder, Samhwa
Inter-Trans Co., Ltd., issued Bill of Lading No. SH9410306[2] in the name of
the shipper consigned to the order of Metropolitan Bank and Trust Company
with arrival notice in Manila to ultimate consignee Blue Mono International
Company, Incorporated (BMICI), Binondo, Manila.
NSCP, for its part, issued Bill of Lading No. NSGPBSML512565[3] in the
name of the freight forwarder, as shipper, consigned to the order of Stamm
International Inc., Makati, Philippines. It is provided therein that:
12. This Bill of Lading shall be prima facie evidence of the receipt of the
Carrier in apparent good order and condition except as, otherwise, noted of
the total number of Containers or other packages or units enumerated
overleaf. Proof to the contrary shall be admissible when this Bill of Lading
has been transferred to a third party acting in good faith. No representation is
made by the Carrier as to the weight, contents, measure, quantity, quality,
description, condition, marks, numbers, or value of the Goods and the Carrier
shall be under no responsibility whatsoever in respect of such description or
particulars.
13. The shipper, whether principal or agent, represents and warrants that
the goods are properly described, marked, secured, and packed and may be
handled in ordinary course without damage to the goods, ship, or property or
persons and guarantees the correctness of the particulars, weight or each
piece or package and description of the goods and agrees to ascertain and to
disclose in writing on shipment, any condition, nature, quality, ingredient or
characteristic that may cause damage, injury or detriment to the goods, other
property, the ship or to persons, and for the failure to do so the shipper agrees
to be liable for and fully indemnify the carrier and hold it harmless in respect
of any injury or death of any person and loss or damage to cargo or
property. The carrier shall be responsible as to the correctness of any such
mark, descriptions or representations.[4]
The shipment was contained in two wooden crates, namely, Crate No. 1
and Crate No. 2, complete and in good order condition, covered by
Commercial Invoice No. YJ-73564 DTD[5] and a Packing List.[6] There were
no markings on the outer portion of the crates except the name of the
consignee.[7] Crate No. 1 measured 24 cubic meters and weighed 3,620 kgs. It
contained the following articles: one (1) unit Lathe Machine complete with
parts and accessories; one (1) unit Surface Grinder complete with parts and
accessories; and one (1) unit Milling Machine complete with parts and
accessories. On the flooring of the wooden crates were three wooden battens
placed side by side to support the weight of the cargo. Crate No. 2, on the
other hand, measured 10 cubic meters and weighed 2,060 kgs. The Lathe
Machine was stuffed in the crate. The shipment had a total invoice value of
US$90,000.00 C&F Manila.[8] It was insured for P2,547,270.00 with the
Philippine Charter Insurance Corporation (PCIC) thru its general agent,
Family Insurance and Investment Corporation,[9] under Marine Risk Note No.
68043 dated October 24, 1994.[10]
The M/V National Honor arrived at the Manila International Container
Terminal (MICT) on November 14, 1995. The International Container
Terminal Services, Incorporated (ICTSI) was furnished with a copy of the
crate cargo list and bill of lading, and it knew the contents of the crate.[11] The
following day, the vessel started discharging its cargoes using its winch
crane. The crane was operated by Olegario Balsa, a winchman from
the ICTSI,[12] the exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the
crew and the surveyor of the ICTSI, conducted an inspection of the
cargo.[13] They inspected the hatches, checked the cargo and found it in
apparent good condition.[14] Claudio Cansino, the stevedore of the ICTSI,
placed two sling cables on each end of Crate No. 1.[15] No sling cable was
fastened on the mid-portion of the crate. In Dauzs experience, this was a
normal procedure.[16] As the crate was being hoisted from the vessels hatch,
the mid-portion of the wooden flooring suddenly snapped in the air, about five
feet high from the vessels twin deck, sending all its contents crashing down
hard,[17] resulting in extensive damage to the shipment.
BMICIs customs broker, JRM Incorporated, took delivery of the cargo in
such damaged condition.[18] Upon receipt of the damaged shipment, BMICI
found that the same could no longer be used for the intended purpose. The
Mariners Adjustment Corporation hired by PCIC conducted a survey and
declared that the packing of the shipment was considered insufficient. It ruled
out the possibility of taxes due to insufficiency of packing. It opined that three
to four pieces of cable or wire rope slings, held in all equal setting, never by-
passing the center of the crate, should have been used, considering that the
crate contained heavy machinery.[19]
BMICI subsequently filed separate claims against the NSCP,[20] the
ICTSI,[21] and its insurer, the PCIC,[22] for US$61,500.00. When the other
companies denied liability, PCIC paid the claim and was issued a Subrogation
Receipt[23] for P1,740,634.50.
On March 22, 1995, PCIC, as subrogee, filed with the RTC of Manila,
Branch 35, a Complaint for Damages[24] against the Unknown owner of the
vessel M/V National Honor, NSCP and ICTSI, as defendants.
PCIC alleged that the loss was due to the fault and negligence of the
defendants. It prayed, among others
WHEREFORE, it is respectfully prayed of this Honorable Court that
judgment be rendered ordering defendants to pay plaintiff, jointly or in the
alternative, the following:
1. Actual damages in the amount of P1,740,634.50 plus legal
interest at the time of the filing of this complaint until fully
paid;
2. Attorneys fees in the amount of P100,000.00;
3. Cost of suit.[25]
ICTSI, for its part, filed its Answer with Counterclaim and Cross-claim
against its co-defendant NSCP, claiming that the loss/damage of the shipment
was caused exclusively by the defective material of the wooden battens of the
shipment, insufficient packing or acts of the shipper.
At the trial, Anthony Abarquez, the safety inspector of ICTSI, testified
that the wooden battens placed on the wooden flooring of the crate was of good
material but was not strong enough to support the weight of the machines
inside the crate. He averred that most stevedores did not know how to read
and write; hence, he placed the sling cables only on those portions of the crate
where the arrow signs were placed, as in the case of fragile cargo. He said that
unless otherwise indicated by arrow signs, the ICTSI used only two cable
slings on each side of the crate and would not place a sling cable in the mid-
section.[26] He declared that the crate fell from the cranes because the wooden
batten in the mid-portion was broken as it was being lifted.[27] He concluded
that the loss/damage was caused by the failure of the shipper or its packer to
place wooden battens of strong materials under the flooring of the crate, and
to place a sign in its mid-term section where the sling cables would be placed.
The ICTSI adduced in evidence the report of the R.J. Del Pan & Co., Inc.
that the damage to the cargo could be attributed to insufficient packing and
unbalanced weight distribution of the cargo inside the crate as evidenced by
the types and shapes of items found.[28]
The trial court rendered judgment for PCIC and ordered the complaint
dismissed, thus:
WHEREFORE, the complaint of the plaintiff, and the respective
counterclaims of the two defendants are dismissed, with costs against the
plaintiff.
SO ORDERED.[29]
According to the trial court, the loss of the shipment contained in Crate
No. 1 was due to the internal defect and weakness of the materials used in the
fabrication of the crates. The middle wooden batten had a hole (bukong-
bukong). The trial court rejected the certification[30] of the shipper, stating that
the shipment was properly packed and secured, as mere hearsay and devoid of
any evidentiary weight, the affiant not having testified.
Not satisfied, PCIC appealed[31] to the CA which rendered judgment on
January 19, 2004 affirming in toto the appealed decision, with this fallo
WHEREFORE, the decision of the Regional Trial Court of Manila, Branch
35, dated February 17, 1997, is AFFIRMED.
SO ORDERED.[32]
The appellate court held, inter alia, that it was bound by the finding of
facts of the RTC, especially so where the evidence in support thereof is more
than substantial. It ratiocinated that the loss of the shipment was due to an
excepted cause [t]he character of the goods or defects in the packing or in the
containers and the failure of the shipper to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment.[33] It
blamed the shipper for its failure to use materials of stronger quality to support
the heavy machines and to indicate an arrow in the middle portion of the cargo
where additional slings should be attached.[34] The CA concluded that common
carriers are not absolute insurers against all risks in the transport of the
goods.[35]
Hence, this petition by the PCIC, where it alleges that:
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT HOLDING THAT RESPONDENT COMMON CARRIER IS
LIABLE FOR THE DAMAGE SUSTAINED BY THE SHIPMENT IN THE
POSSESSION OF THE ARRASTRE OPERATOR.
II.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW
IN NOT APPLYING THE STATUTORY PRESUMPTION OF FAULT
AND NEGLIGENCE IN THE CASE AT BAR.
III.
THE COURT OF APPEALS GROSSLY MISCOMPREHENDED THE
FACTS IN FINDING THAT THE DAMAGE SUSTAINED BY THE
[SHIPMENT] WAS DUE TO ITS DEFECTIVE PACKING AND NOT TO
THE FAULT AND NEGLIGENCE OF THE RESPONDENTS.[36]
The petitioner asserts that the mere proof of receipt of the shipment by
the common carrier (to the carrier) in good order, and their arrival at the place
of destination in bad order makes out a prima facie case against it; in such
case, it is liable for the loss or damage to the cargo absent satisfactory
explanation given by the carrier as to the exercise of extraordinary
diligence. The petitioner avers that the shipment was sufficiently packed in
wooden boxes, as shown by the fact that it was accepted on board the vessel
and arrived in Manila safely. It emphasizes that the respondents did not
contest the contents of the bill of lading, and that the respondents knew that
the manner and condition of the packing of the cargo was normal and barren
of defects. It maintains that it behooved the respondent ICTSI to place three
to four cables or wire slings in equal settings, including the center portion of
the crate to prevent damage to the cargo:
[A] simple look at the manifesto of the cargo and the bill of lading would
have alerted respondents of the nature of the cargo consisting of thick and
heavy machinery. Extra-care should have been made and extended in the
discharge of the subject shipment. Had the respondent only bothered to
check the list of its contents, they would have been nervous enough to place
additional slings and cables to support those massive machines, which were
composed almost entirely of thick steel, clearly intended for heavy
industries. As indicated in the list, the boxes contained one lat[h]e machine,
one milling machine and one grinding machine-all coming with complete
parts and accessories. Yet, not one among the respondents were cautious
enough. Here lies the utter failure of the respondents to observed
extraordinary diligence in the handling of the cargo in their custody and
possession, which the Court of Appeals should have readily observed in its
appreciation of the pertinent facts.[37]
The petitioner posits that the loss/damage was caused by the mishandling
of the shipment by therein respondent ICTSI, the arrastre operator, and not by
its negligence.
The petitioner insists that the respondents did not observe extraordinary
diligence in the care of the goods. It argues that in the performance of its
obligations, the respondent ICTSI should observe the same degree of diligence
as that required of a common carrier under the New Civil Code of the
Philippines. Citing Eastern Shipping Lines, Inc. v. Court of Appeals,[38] it
posits that respondents are liable in solidum to it, inasmuch as both are charged
with the obligation to deliver the goods in good condition to its consignee,
BMICI.
Respondent NSCP counters that if ever respondent ICTSI is adjudged
liable, it is not solidarily liable with it. It further avers that the carrier cannot
discharge directly to the consignee because cargo discharging is the monopoly
of the arrastre. Liability, therefore, falls solely upon the shoulder of respondent
ICTSI, inasmuch as the discharging of cargoes from the vessel was its
exclusive responsibility. Besides, the petitioner is raising questions of facts,
improper in a petition for review on certiorari.[39]
Respondent ICTSI avers that the issues raised are factual, hence,
improper under Rule 45 of the Rules of Court. It claims that it is merely a
depository and not a common carrier; hence, it is not obliged to exercise
extraordinary diligence. It reiterates that the loss/damage was caused by the
failure of the shipper or his packer to place a sign on the sides and middle
portion of the crate that extra care should be employed in handling the
shipment, and that the middle wooden batten on the flooring of the crate had a
hole. The respondent asserts that the testimony of Anthony Abarquez, who
conducted his investigation at the site of the incident, should prevail over that
of Rolando Balatbat. As an alternative, it argues that if ever adjudged liable,
its liability is limited only to P3,500.00 as expressed in the liability clause of
Gate Pass CFS-BR-GP No. 319773.
The petition has no merit.
The well-entrenched rule in our jurisdiction is that only questions of law
may be entertained by this Court in a petition for review on certiorari. This
rule, however, is not ironclad and admits certain exceptions, such as when (1)
the conclusion is grounded on speculations, surmises or conjectures; (2) the
inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse
of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) there is no citation of specific evidence on
which the factual findings are based; (7) the findings of absence of facts are
contradicted by the presence of evidence on record; (8) the findings of the
Court of Appeals are contrary to those of the trial court; (9) the Court of
Appeals manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion; (10) the findings of
the Court of Appeals are beyond the issues of the case; and (11) such findings
are contrary to the admissions of both parties.[40]
We have reviewed the records and find no justification to warrant the
application of any exception to the general rule.
We agree with the contention of the petitioner that common carriers, from
the nature of their business and for reasons of public policy, are mandated to
observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case.[41] The Court has defined extraordinary diligence
in the vigilance over the goods as follows:
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for sale, carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and to
exercise due care in the handling and stowage, including such methods as
their nature requires.[42]
The common carriers duty to observe the requisite diligence in the
shipment of goods lasts from the time the articles are surrendered to or
unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for their
acceptance, by the person entitled to receive them.[43] When the goods shipped
are either lost or arrive in damaged condition, a presumption arises against the
carrier of its failure to observe that diligence, and there need not be an express
finding of negligence to hold it liable.[44] To overcome the presumption of
negligence in the case of loss, destruction or deterioration of the goods, the
common carrier must prove that it exercised extraordinary diligence.[45]
However, under Article 1734 of the New Civil Code, the presumption of
negligence does not apply to any of the following causes:
1. Flood, storm, earthquake, lightning or other natural disaster or
calamity;
2. Act of the public enemy in war, whether international or civil;
3. Act or omission of the shipper or owner of the goods;
4. The character of the goods or defects in the packing or in the
containers;
5. Order or act of competent public authority.
It bears stressing that the enumeration in Article 1734 of the New Civil
Code which exempts the common carrier for the loss or damage to the cargo
is a closed list.[46] To exculpate itself from liability for the loss/damage to the
cargo under any of the causes, the common carrier is burdened to prove any of
the aforecited causes claimed by it by a preponderance of evidence. If the
carrier succeeds, the burden of evidence is shifted to the shipper to prove that
the carrier is negligent.[47]
Defect is the want or absence of something necessary for completeness
or perfection; a lack or absence of something essential to completeness; a
deficiency in something essential to the proper use for the purpose for which
a thing is to be used.[48] On the other hand, inferior means of poor quality,
mediocre, or second rate.[49] A thing may be of inferior quality but not
necessarily defective. In other words, defectiveness is not synonymous with
inferiority.
In the present case, the trial court declared that based on the record, the
loss of the shipment was caused by the negligence of the petitioner as the
shipper:
The same may be said with respect to defendant ICTSI. The breakage and
collapse of Crate No. 1 and the total destruction of its contents were not
imputable to any fault or negligence on the part of said defendant in handling
the unloading of the cargoes from the carrying vessel, but was due solely to
the inherent defect and weakness of the materials used in the fabrication of
said crate.
The crate should have three solid and strong wooden batten placed side by
side underneath or on the flooring of the crate to support the weight of its
contents. However, in the case of the crate in dispute, although there were
three wooden battens placed side by side on its flooring, the middle wooden
batten, which carried substantial volume of the weight of the crates contents,
had a knot hole or bukong-bukong, which considerably affected, reduced and
weakened its strength. Because of the enormous weight of the machineries
inside this crate, the middle wooden batten gave way and collapsed. As the
combined strength of the other two wooden battens were not sufficient to
hold and carry the load, they too simultaneously with the middle wooden
battens gave way and collapsed (TSN, Sept. 26, 1996, pp. 20-24).
Crate No. 1 was provided by the shipper of the machineries in Seoul,
Korea. There is nothing in the record which would indicate that defendant
ICTSI had any role in the choice of the materials used in fabricating this
crate. Said defendant, therefore, cannot be held as blame worthy for the loss
of the machineries contained in Crate No. 1.[50]
The CA affirmed the ruling of the RTC, thus:
The case at bar falls under one of the exceptions mentioned in Article 1734
of the Civil Code, particularly number (4) thereof, i.e., the character of the
goods or defects in the packing or in the containers. The trial court found
that the breakage of the crate was not due to the fault or negligence of ICTSI,
but to the inherent defect and weakness of the materials used in the
fabrication of the said crate.
Upon examination of the records, We find no compelling reason to depart
from the factual findings of the trial court.
It appears that the wooden batten used as support for the flooring was not
made of good materials, which caused the middle portion thereof to give way
when it was lifted. The shipper also failed to indicate signs to notify the
stevedores that extra care should be employed in handling the shipment.
Claudio Cansino, a stevedore of ICTSI, testified before the court their duties
and responsibilities:
Q: With regard to crates, what do you do with the crates?
A: Everyday with the crates, there is an arrow drawn where the
sling is placed, Maam.
Q: When the crates have arrows drawn and where you placed the
slings, what do you do with these crates?
A: A sling is placed on it, Maam.
Q: After you placed the slings, what do you do with the crates?
A: After I have placed a sling properly, I ask the crane (sic) to haul
it, Maam.
Q: Now, what, if any, were written or were marked on the crate?
A: The thing that was marked on the cargo is an arrow just like of
a chain, Maam.
Q: And where did you see or what parts of the crate did you see
those arrows?
A: At the corner of the crate, Maam.
Q: How many arrows did you see?
A: Four (4) on both sides, Maam.
Q: What did you do with the arrows?
A: When I saw the arrows, thats where I placed the slings, Maam.
Q: Now, did you find any other marks on the crate?
 A: Nothing more, Maam. facie presumption only as to the external condition and not to that not open to
inspection.[53]
Q: Now, Mr. Witness, if there are no arrows, would you place slings
on the parts where there are no arrows? IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for
A: You can not place slings if there are no arrows, Maam. lack of merit.
SO ORDERED.
Appellants allegation that since the cargo arrived safely from the port of
[P]usan, Korea without defect, the fault should be attributed to the arrastre THIRD DIVISION
operator who mishandled the cargo, is without merit. The cargo fell while it
was being carried only at about five (5) feet high above the ground. It would
not have so easily collapsed had the cargo been properly packed. The LEA MER INDUSTRIES, INC., G.R. No. 161745
shipper should have used materials of stronger quality to support the heavy Petitioner,
machines. Not only did the shipper fail to properly pack the cargo, it also Present
failed to indicate an arrow in the middle portion of the cargo where Panganiban, J.,
additional slings should be attached. At any rate, the issue of negligence is Chairman,
factual in nature and in this regard, it is settled that factual findings of the - versus - Sandoval-Gutierrez,
lower courts are entitled to great weight and respect on appeal, and, in fact, Corona,
accorded finality when supported by substantial evidence.[51] Carpio Morales, and
Garcia, JJ
We agree with the trial and appellate courts. Promulgated:
MALAYAN INSURANCE CO., INC.,*
The petitioner failed to adduce any evidence to counter that of respondent Respondent. September 30, 2005
ICTSI. The petitioner failed to rebut the testimony of Dauz, that the crates x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
were sealed and that the contents thereof could not be seen from the
outside.[52] While it is true that the crate contained machineries and spare parts, DECISION
it cannot thereby be concluded that the respondents knew or should have
known that the middle wooden batten had a hole, or that it was not strong
enough to bear the weight of the shipment. PANGANIBAN, J.:
There is no showing in the Bill of Lading that the shipment was in good
order or condition when the carrier received the cargo, or that the three wooden
battens under the flooring of the cargo were not defective or insufficient or
inadequate. On the other hand, under Bill of Lading No. NSGPBSML512565 ommon carriers are bound to observe extraordinary diligence in their
issued by the respondent NSCP and accepted by the petitioner, the latter
represented and warranted that the goods were properly packed, and disclosed
in writing the condition, nature, quality or characteristic that may cause vigilance over the goods entrusted to them, as required by the nature of
C
damage, injury or detriment to the goods. Absent any signs on the shipment
requiring the placement of a sling cable in the mid-portion of the crate, the their business and for reasons of public policy. Consequently, the law
respondent ICTSI was not obliged to do so.
The statement in the Bill of Lading, that the shipment was in apparent presumes that common carriers are at fault or negligent for any loss or damage
good condition, is sufficient to sustain a finding of absence of defects in the
merchandise. Case law has it that such statement will create a prima
 Ilian Silica Mining entered into a contract of carriage with Lea Mer
to the goods that they transport. In the present case, the evidence submitted by
Industries, Inc., for the shipment of 900 metric tons of silica sand valued
petitioner to overcome this presumption was sorely insufficient.
at P565,000.[5]Consigned to Vulcan Industrial and Mining Corporation, the

cargo was to be transported from Palawan to Manila. On October 25, 1991, the
The Case
silica sand was placed on board Judy VII, a barge leased by Lea Mer.[6] During

the voyage, the vessel sank, resulting in the loss of the cargo.[7]
[1]
Before us is a Petition for Review under Rule 45 of the Rules of

Court, assailing the October 9, 2002 Decision[2] and the December 29, 2003
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the
Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The
lost cargo.[8] To recover the amount paid and in the exercise of its right of
challenged Decision disposed as follows:
subrogation, Malayan demanded reimbursement from Lea Mer, which refused
WHEREFORE, the appeal is GRANTED. The
December 7, 1999 decision of the Regional Trial Court of to comply. Consequently, Malayan instituted a Complaint with the Regional
Manila, Branch 42 in Civil Case No. 92-63159 is
hereby REVERSED and SET ASIDE. [Petitioner] is Trial Court (RTC) of Manila on September 4, 1992, for the collection
ordered to pay the [herein respondent] the value of the lost
cargo in the amount of P565,000.00. Costs against the [herein of P565,000 representing the amount that respondent had paid Vulcan.[9]
petitioner].[4]
On October 7, 1999, the trial court dismissed the Complaint, upon

finding that the cause of the loss was a fortuitous event.[10] The RTC noted that
The assailed Resolution denied reconsideration.
the vessel had sunk because of the bad weather condition brought about by

Typhoon Trining. The court ruled that petitioner had no advance knowledge

of the incoming typhoon, and that the vessel had been cleared by the Philippine
The Facts
Coast Guard to travel from Palawan to Manila.[11]
 specialist, Ms. Rosa Barba y Saliente, to the effect that
Ruling of the Court of Appeals typhoon Trining did not hit Metro Manila or Palawan.[14]

Reversing the trial court, the CA held that the vessel was not seaworthy when
In the main, the issues are as follows: (1) whether petitioner is liable for the
it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioners

fault, not by a fortuitous event.[12] loss of the cargo, and (2) whether the survey report of Jesus Cortez is

admissible in evidence.

Hence, this recourse.[13]

The Courts Ruling

The Issues

The Petition has no merit.

Petitioner states the issues in this wise: First Issue:
Liability for Loss of Cargo
A. Whether or not the survey report of the cargo surveyor,
Jesus Cortez, who had not been presented as a witness of the
said report during the trial of this case before the lower court
can be admitted in evidence to prove the alleged facts cited in
the said report. Question of Fact
B. Whether or not the respondent, Court of Appeals, had
validly or legally reversed the finding of fact of the Regional
Trial Court which clearly and unequivocally held that the loss The resolution of the present case hinges on whether the loss of the cargo was
of the cargo subject of this case was caused by fortuitous event
for which herein petitioner could not be held liable. due to a fortuitous event. This issue involves primarily a question of fact,
C. Whether or not the respondent, Court of Appeals, had
committed serious error and grave abuse of discretion in notwithstanding petitioners claim that it pertains only to a question of law. As
disregarding the testimony of the witness from the MARINA,
Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy a general rule, questions of fact may not be raised in a petition for
VII was seaworthy at the time of incident and further in
disregarding the testimony of the PAG-ASA weather
review.[15] The present case serves as an exception to this rule, because the
 and navigation thereof to the charterer; anything short of such
a complete transfer is a contract of affreightment (time or
factual findings of the appellate and the trial courts vary. [16] This Court
voyage charter party) or not a charter party at all.[20]

meticulously reviewed the records, but found no reason to reverse the CA.

The distinction is significant, because a demise or bareboat charter

Rule on Common Carriers
indicates a business undertaking that is private in character. [21] Consequently,

Common carriers are persons, corporations, firms or associations engaged in

the rights and obligations of the parties to a contract of private carriage are

the business of carrying or transporting passengers or goods, or both -- by land,

governed principally by their stipulations, not by the law on common

water, or air -- when this service is offered to the public for

carriers.[22]

compensation.[17] Petitioner is clearly a common carrier, because it offers to

the public its business of transporting goods through its vessels.[18]

The Contract in the present case was one of affreightment, as shown

by the fact that it was petitioners crew that manned the tugboat M/V Ayalit and

Thus, the Court corrects the trial courts finding that petitioner became a private
controlled the barge Judy VII.[23] Necessarily, petitioner was a common carrier,

carrier when Vulcan chartered it.[19] Charter parties are classified as contracts
and the pertinent law governs the present factual circumstances.

of demise (or bareboat) and affreightment, which are distinguished as follows:

Under the demise or bareboat charter of the vessel,

the charterer will generally be considered as owner for the Extraordinary Diligence Required
voyage or service stipulated. The charterer mans the vessel
with his own people and becomes, in effect, the owner pro hac
vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command
Common carriers are bound to observe extraordinary diligence in their

vigilance over the goods and the safety of the passengers they transport, as Rule on Fortuitous Events

required by the nature of their business and for reasons of public

Article 1174 of the Civil Code provides that no person shall be responsible for
policy.[24] Extraordinary diligence requires rendering service with the greatest
a fortuitous event which could not be foreseen, or which, though foreseen, was
skill and foresight to avoid damage and destruction to the goods entrusted for
inevitable. Thus, if the loss or damage was due to such an event, a common
carriage and delivery.[25]
carrier is exempted from liability.

Jurisprudence defines the elements of a fortuitous event as follows: (a)

Common carriers are presumed to have been at fault or to have acted
the cause of the unforeseen and unexpected occurrence, or the failure of the
negligently for loss or damage to the goods that they have transported.[26] This
debtors to comply with their obligations, must have been independent of
presumption can be rebutted only by proof that they observed extraordinary
human will; (b) the event that constituted the caso fortuito must have been
diligence, or that the loss or damage was occasioned by any of the following
impossible to foreseeor, if foreseeable, impossible to avoid; (c) the occurrence
causes:[27]
must have been such as to render it impossible for the debtors to fulfill their
(1) Flood, storm, earthquake, lightning, or other natural
disaster or calamity;
obligation in a normal manner; and (d) the obligor must have been free from
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods; any participation in the aggravation of the resulting injury to the creditor.[29]
(4) The character of the goods or defects in the packing or in
the containers;
(5) Order or act of competent public authority.[28]
 To excuse the common carrier fully of any liability, the fortuitous October 25, 1991, the date on which the voyage commenced and the barge

event must have been the proximate and only cause of the loss.[30] Moreover, sank, Typhoon Trining was allegedly far from Palawan, where the storm

it should have exercised due diligence to prevent or minimize the loss before, warning was only Signal No. 1.[34]

during and after the occurrence of the fortuitous event.[31] The evidence presented by petitioner in support of its defense of

fortuitous event was sorely insufficient. As required by the pertinent law, it

Loss in the Instant Case was not enough for the common carrier to show that there was an unforeseen

or unexpected occurrence. It had to show that it was free from any fault -- a
There is no controversy regarding the loss of the cargo in the present case. As
fact it miserably failed to prove.
the common carrier, petitioner bore the burden of proving that it had exercised

extraordinary diligence to avoid the loss, or that the loss had been occasioned
First, petitioner presented no evidence that it had attempted to
by a fortuitous event -- an exempting circumstance.
minimize or prevent the loss before, during or after the alleged fortuitous

event.[35] Its witness, Joey A. Draper, testified that he could no longer

It was precisely this circumstance that petitioner cited to escape
remember whether anything had been done to minimize loss when water
liability. Lea Mer claimed that the loss of the cargo was due to the bad weather
started entering the barge.[36]This fact was confirmed during his cross-
[32]
condition brought about by Typhoon Trining. Evidence was presented to
examination, as shown by the following brief exchange:
show that petitioner had not been informed of the incoming typhoon, and that
Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other
the Philippine Coast Guard had given it clearance to begin the voyage.[33] On
precautionary measure[s] exercised by you and the
 crew of Judy VII so as to prevent the los[s] or sinking
of barge Judy VII?

xxxxxxxxx
Petitioner offered no evidence to rebut the existence of the holes. Its
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action
taken by the officers and crew of tugboat Ayalit and witness, Domingo A. Luna, testified that the barge was in tip-top or excellent
barge Judy VII x x x to prevent the sinking of barge
Judy VII? condition,[40] but that he had not personally inspected it when it left

xxxxxxxxx
Palawan.[41]
Court:
Mr. witness, did the captain of that tugboat give any
instruction on how to save the barge Judy VII?

Joey Draper: The submission of the Philippine Coast Guards Certificate of

I can no longer remember sir, because that happened [a] long
time ago.[37] Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that the

barge was seaworthy.[42] The regularity of the issuance of the Certificate is

disputably presumed.[43] It could be contradicted by competent evidence,

Second, the alleged fortuitous event was not the sole and proximate

which respondent offered. Moreover, this evidence did not necessarily take
cause of the loss. There is a preponderance of evidence that the barge was not

into account the actual condition of

seaworthy when it sailed for Manila.[38] Respondent was able to prove that, in

the vessel at the time of the commencement of the voyage.[44]

the hull of the barge, there were holes that might have caused or aggravated

the sinking.[39]Because the presumption of negligence or fault applied to Second Issue:

Admissibility of the Survey Report
petitioner, it was incumbent upon it to show that there were no holes; or, if

there were, that they did not aggravate the sinking.

Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo of the holes was proved by the testimonies of the witnesses, not merely by

surveyor, should not have been admitted in evidence. The Court partly agrees. Cortez Survey Report.

Because he did not testify during the trial,[46] then the Report that he had
Rule on Independently
Relevant Statement
prepared was hearsay and therefore inadmissible for the purpose of proving

the truth of its contents.

That witnesses must be examined and presented during the trial,[50] and that

their testimonies must be confined to personal knowledge is required by the

The Survey Report Not the Sole Evidence
rules on evidence, from which we quote:

The facts reveal that Cortezs Survey Report was used in the testimonies of
respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a
cargo marine surveyor and the vice-president of Toplis and Harding
Section 36. Testimony generally confined to personal
knowledge; hearsay excluded. A witness can testify only to
those facts which he knows of his personal knowledge; that
is, which are derived from his own perception, except as
otherwise provided in these rules.[51]

Company.[47] Soriano testified that the Survey Report had been used in

On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit,
preparing the final Adjustment Report conducted by their company.[48] The

which respondent had offered as evidence.[52] Well-settled is the rule that,

final Report showed that the barge was not seaworthy because of the existence

unless the affiant is presented as a witness, an affidavit is considered

of the holes. Manlapig testified that he had prepared that Report after taking

hearsay.[53]
into account the findings of the surveyor, as well as the pictures and the

sketches of the place where the sinking occurred.[49] Evidently, the existence
 WHEREFORE, the Petition is DENIED and the assailed Decision
An exception to the foregoing rule is that on independently relevant
and Resolution are AFFIRMED. Costs against petitioner.
statements. A report made by a person is admissible if it is intended to prove

the tenor, not the truth, of the statements.[54] Independent of the truth or the
SO ORDERED.

falsity of the statement given in the report, the fact that it has been made is CEBU SALVAGE CORPORATION, G.R. No. 150403
Petitioner,
relevant. Here, the hearsay rule does not apply.[55] Present:

PUNO, C.J., Chairperson

,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
In the instant case, the challenged Survey Report prepared by Cortez was
AZCUNA and
GARCIA, JJ.
admitted only as part of the testimonies of respondents witnesses. The referral
PHILIPPINE HOME
ASSURANCE
to Cortezs Report was in relation to Manlapigs final Adjustment Report.
CORPORATION,
Respondent. Promulgated:
Evidently, it was the existence of the Survey Report that was testified to. The
January 25, 2007
admissibility of that Report as part of the testimonies of the witnesses was x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

correctly ruled upon by the trial court.

DECISION

CORONA, J.:

At any rate, even without the Survey Report, petitioner has already failed to
May a carrier be held liable for the loss of cargo resulting from the sinking of
overcome the presumption of fault that applies to common carriers.
a ship it does not own?
This is the issue presented for the Courts resolution in this petition for review MCCII filed a claim for the loss of the shipment with its insurer, respondent

on certiorari[1] assailing the March 16, 2001 decision[2] and September 17, Philippine Home Assurance Corporation.[11] Respondent paid the claim in the

2001 resolution[3] of the Court of Appeals (CA) in CA-G.R. CV No. 40473 amount of P211,500and was subrogated to the rights of MCCII.[12] Thereafter,

which in turn affirmed the December 27, 1989 decision[4] of the Regional Trial it filed a case in the RTC[13] against petitioner for reimbursement of the amount

Court (RTC), Branch 145, Makati, MetroManila.[5] it paid MCCII.

The pertinent facts follow.

After trial, the RTC rendered judgment in favor of respondent. It

On November 12, 1984, petitioner Cebu Salvage Corporation (as ordered petitioner to pay respondent P211,500 plus legal interest, attorneys

carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as charterer) fees equivalent to 25% of the award and costs of suit.

entered into a voyage charter[6] wherein petitioner was to load 800 to 1,100
On appeal, the CA affirmed the decision of the RTC. Hence, this
metric tons of silica quartz on board the

M/T Espiritu Santo[7] at Ayungon, Negros Occidental for transport to and petition.

discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils.,

Petitioner and MCCII entered into a voyage charter, also known as a
Inc.[8]
contract of affreightment wherein the ship was leased for a single voyage for
Pursuant to the contract, on December 23, 1984, petitioner received
the conveyance of goods, in consideration of the payment of freight.[14] Under
and loaded 1,100 metric tons of silica quartz on board the M/T Espiritu Santo
a voyage charter, the shipowner retains the possession, command and
which left Ayungon for Tagoloan the next day.[9] The shipment never reached
navigation of the ship, the charterer or freighter merely having use of the space
its destination, however, because the M/T Espiritu Santo sank in the afternoon

of December 24, 1984 off the beach of Opol,Misamis Oriental, resulting in the in the vessel in return for his payment of freight.[15] An owner who retains

total loss of the cargo.[10] possession of the ship remains liable as carrier and must answer for loss or

non-delivery of the goods received for transportation.[16]

 Petitioner argues that the CA erred when it affirmed the RTC finding
that the voyage charter it entered into with MCCII was a contract of
carriage.[17] It insists that the agreement was merely a contract of hire wherein
MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS).[18] Not
being the owner of the M/T Espiritu Santo, petitioner did not have control and
supervision over the vessel, its master and crew.[19] Thus, it could not be held
liable for the loss of the shipment caused by the sinking of a ship it did not
own.
We disagree.
Based on the agreement signed by the parties and the testimony of
petitioners operations manager, it is clear that it was a contract of carriage
petitioner signed with MCCII.It actively negotiated and
solicited MCCIIs account, offered its services to ship the silica quartz and
proposed to utilize the M/T Espiritu Santo in lieu of the M/T Seebees or the
M/T Shirley (as previously agreed upon in the voyage charter) since these
vessels had broken down.[20]
There is no dispute that petitioner was a common carrier. At the time
of the loss of the cargo, it was engaged in the business of carrying and
transporting goods by water, for compensation, and offered its services to the
public.[21]
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence over the goods
they transport according to the circumstances of each case.[22] In the event of
loss of the goods, common carriers are responsible, unless they can prove that
this was brought about by the causes specified in Article 1734 of the Civil
Code.[23] In all other cases, common carriers are presumed to be at fault or to
have acted negligently, unless they prove that they observed extraordinary
diligence.[24]
Petitioner was the one which contracted with MCCII for the transport
of the cargo. It had control over what vessel it would use. All throughout its
dealings with MCCII, it represented itself as a common carrier. The fact that
it did not own the vessel it decided to use to consummate the contract of
carriage did not negate its character and duties as a common carrier. The
MCCII (respondents subrogor) could not be reasonably expected to inquire
about the ownership of the vessels which petitioner carrier offered to
utilize. As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of carriage if it
should be required to know who the actual owner of the vessel is.[25] In fact, in
this case, the voyage charter itself denominated petitioner as the Finally, petitioner asserts that MCCII should be held liable for its own

owner/operator of the vessel.[26] loss since the voyage charter stipulated that cargo insurance was for

the charterers account.[31] This deserves scant consideration. This simply

Petitioner next contends that if there was a contract of carriage, then it
meant that the charterer would take care of having the goods insured. It could
was between MCCII and ALS as evidenced by the bill of lading ALS issued.[27]
not exculpate the carrier from liability for the breach of its contract of

Again, we disagree. carriage. The law, in fact, prohibits it and condemns it as unjust and contrary

to public policy.[32]
The bill of lading was merely a receipt issued by ALS to evidence the

fact that the goods had been received for transportation. It was not signed by To summarize, a contract of carriage of goods was shown to exist; the

MCCII, as in fact it was simply signed by the supercargo of ALS.[28] This is cargo was loaded on board the vessel; loss or non-delivery of the cargo was

consistent with the fact that MCCII did not contract directly with ALS. While proven; and petitioner failed to prove that it exercised extraordinary diligence

it is true that a bill of lading may serve as the contract of carriage between the to prevent such loss or that it was due to some casualty or force majeure. The

parties,[29] it cannot prevail over the express provision of the voyage charter voyage charter here being a contract of affreightment, the carrier was

that MCCII and petitioner executed: answerable for the loss of the goods received for transportation.[33]

[I]n cases where a Bill of Lading has been issued by a carrier

The idea proposed by petitioner is not only preposterous, it is also
covering goods shipped aboard a vessel under a charter party,
and the charterer is also the holder of the bill of lading, the bill dangerous. It says that a carrier that enters into a contract of carriage is not
of lading operates as the receipt for the goods, and as
document of title passing the property of the goods, but not as liable to the charterer or shipper if it does not own the vessel it chooses to use.
varying the contract between the charterer and the shipowner.
The Bill of Lading becomes, therefore, only a receipt and not MCCII never dealt with ALS and yet petitioner insists that MCCII should sue
the contract of carriage in a charter of the entire vessel, for the
contract is the Charter Party, and is the law between the parties ALS for reimbursement for its loss. Certainly, to permit a common carrier to
who are bound by its terms and condition provided that these
are not contrary to law, morals, good customs, public order escape its responsibility for the goods it agreed to transport (by the expedient
and public policy. [30]
of alleging non-ownership of the vessel it employed) would radically derogate

from the carrier's duty of extraordinary diligence. It would also open the door
 Court (RTC) of Pasig City for damages arising from the death of their son
to collusion between the carrier and the supposed owner and to the possible
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000
shifting of liability from the carrier to one without any financial capability to
on board the boat M/B Coco Beach III that capsized en route to Batangas from
answer for the resulting damages.[34] Puerto Galera, Oriental Mindoro where the couple had stayed at Coco Beach
Island Resort (Resort) owned and operated by respondent.
WHEREFORE, the petition is hereby DENIED.
The stay of the newly wed Ruelito and his wife at the Resort from September
9 to 11, 2000 was by virtue of a tour package-contract with respondent that
Costs against petitioner.
included transportation to and from the Resort and the point of departure in
Batangas.
SO ORDERED.

SPOUSES DANTE CRUZ and G.R. No. 186312 Miguel C. Matute (Matute),[2] a scuba diving instructor and one of the
LEONORA CRUZ,
Petitioners, Present: survivors, gave his account of the incident that led to the filing of the complaint
as follows:
CARPIO MORALES, J.,
Chairperson,
BRION, Matute stayed at the Resort from September 8 to 11, 2000. He was originally
- versus - BERSAMIN, scheduled to leave the Resort in the afternoon of September 10, 2000, but was
ABAD,* and
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ. advised to stay for another night because of strong winds and heavy rains.
Respondent.
Promulgated:
June 29, 2010 On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners son and his wife trekked to the other side of
x-------------------------------------------------x
the Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.

DECISION
Shortly after the boat sailed, it started to rain. As it moved farther away from
Puerto Galera and into the open seas, the rain and wind got stronger, causing
CARPIO MORALES, J.: the boat to tilt from side to side and the captain to step forward to the front,
leaving the wheel to one of the crew members.
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January
25, 2001[1] against Sun Holidays, Inc. (respondent) with the Regional Trial
 The waves got more unwieldy. After getting hit by two big waves Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
which came one after the other, M/B Coco Beach III capsized putting all September 11, 2000.[6]
passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the In its Answer,[7] respondent denied being a common carrier, alleging that its

boat. Upon seeing the captain, Matute and the other passengers who reached boats are not available to the general public as they only ferry Resort guests

the surface asked him what they could do to save the people who were still and crew members.Nonetheless, it claimed that it exercised the utmost

trapped under the boat. The captain replied Iligtas niyo na lang ang sarili diligence in ensuring the safety of its passengers; contrary to petitioners

niyo (Just save yourselves). allegation, there was no storm on September 11, 2000as the Coast Guard in
fact cleared the voyage; and M/B Coco Beach III was not filled to capacity and

Help came after about 45 minutes when two boats owned by Asia Divers in had sufficient life jackets for its passengers. By way of Counterclaim,

Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded respondent alleged that it is entitled to an award for attorneys fees and

on those two boats were 22 persons, consisting of 18 passengers and four crew litigation expenses amounting to not less than P300,000.

members, who were brought to Pisa Island. Eight passengers, including

Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
petitioners son and his wife, died during the incident.
customarily requires four conditions to be met before a boat is allowed to sail,
to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3) there
At the time of Ruelitos death, he was 28 years old and employed as a
is clearance from the captain and (4) there is clearance from the Resorts
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd.
assistant manager.[8] He added that M/B Coco Beach III met all four conditions
[3]
in Saudi Arabia, with a basic monthly salary of $900.
on September 11, 2000,[9] but a subasco or squall, characterized by strong
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from
winds and big waves, suddenly occurred, causing the boat to capsize.[10]
respondent for the death of their son in the amount of at least P4,000,000.
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed
petitioners Complaint and respondents Counterclaim.
Replying, respondent, by letter dated November 7, 2000,[5] denied any
responsibility for the incident which it considered to be a fortuitous event. It Petitioners Motion for Reconsideration having been denied by Order
nevertheless offered, as an act of commiseration, the amount of P10,000 to dated September 2, 2005,[12] they appealed to the Court of Appeals.
petitioners upon their signing of a waiver.
By Decision of August 19, 2008,[13] the appellate court denied
As petitioners declined respondents offer, they filed the Complaint, as earlier
petitioners appeal, holding, among other things, that the trial court correctly
reflected, alleging that respondent, as a common carrier, was guilty of
ruled that respondent is a private carrier which is only required to observe
negligence in allowing M/B Coco Beach III to sail notwithstanding storm
ordinary diligence; that respondent in fact observed extraordinary diligence in
warning bulletins issued by the Philippine Atmospheric, Geophysical and
transporting its guests on board M/B Coco Beach III; and that the proximate
cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution
dated January 16, 2009,[14] they filed the present Petition for Review.[15]
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour package, the
transporting of its guests is an integral part of its resort business. They inform
that another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resorts ferry services
for guests cannot be considered as ancillary to its business as no income is
derived therefrom; that it exercised extraordinary diligence as shown by the
conditions it had imposed before allowing M/B Coco Beach III to sail; that the
incident was caused by a fortuitous event without any contributory negligence
on its part; and that the other case wherein the appellate court held it liable for
damages involved different plaintiffs, issues and evidence.[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[17] in
characterizing respondent as a common carrier.
The Civil Code defines common carriers in the following
terms:
Article 1732. Common carriers are persons,
corporations, firms or associations engaged
in the business of carrying or transporting
passengers or goods or both, by land, water,
or air for compensation, offering their
services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of
persons or goods or both, and one who does such carrying
only as an ancillary activity(in local idiom, as a
sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering
transportation service on a regular or scheduled
basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to
the general public, i.e., the general community or
population, and one who offers services or solicits business
only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making
such distinctions.
So understood, the concept of common carrier under Article
1732 may be seen to coincide neatly with the notion of public
service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements
the law on common carriers set forth in the Civil Code. Under
Section 13, paragraph (b) of the Public Service Act, public
service includes:
. . . every person that now or hereafter may
own, operate, manage, or control in the
Philippines, for hire or compensation, with
general or limited clientele, whether
permanent, occasional or accidental, and
done for general business purposes, any
common carrier, railroad, street railway,
traction railway, subway motor vehicle,
either for freight or passenger, or both, with
or without fixed route and whatever may be
its classification, freight or carrier service of
any class, express service, steamboat, or
steamship line, pontines, ferries and water
craft, engaged in the transportation of
 passengers or freight or both, shipyard,
marine repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation
system, gas, electric light, heat and power,
water supply and power petroleum, sewerage
system, wire or wireless communications
systems, wire or wireless broadcasting
stations and other similar public services . .
.[18] (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so
intertwined with its main business as to be properly considered ancillary
thereto. The constancy of respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it
offers, which include the ferry services, may be availed of by anyone who can
afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry
services is of no moment. It would be imprudent to suppose that it provides
said services at a loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the transportation fee in arriving at
the tour package price. That guests who opt not to avail of respondents ferry
services pay the same amount is likewise inconsequential. These guests may
only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining common
carriers has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carriers principal business, whether it is
offered on a regular basis, or whether it is offered to the general public. The
intent of the law is thus to not consider such distinctions.Otherwise, there is no
telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid the
legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence for
the safety of the passengers transported by them, according to all the
circumstances of each case.[19] They are bound to carry the passengers safely
as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances.[20]
When a passenger dies or is injured in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or negligent. In fact,
there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may
only be overcome by evidence that the carrier exercised extraordinary
diligence.[21]
Respondent nevertheless harps on its strict compliance with the earlier
mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000.Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts
and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon which would also affect
the province of Mindoro.[22] By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such weather
condition.[23]
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other peoples lives at risk. The extraordinary
diligence required of common carriers demands that they take care of the
goods or lives entrusted to their hands as if they were their own. This
respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous
event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor.[24]
To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and after
the occurrence of the fortuitous event.[25]
Respondent cites the squall that occurred during the voyage as the fortuitous
event that overturned M/B Coco Beach III. As reflected above, however, the
occurrence of squalls was expected under the weather condition of September
11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine
trouble before it capsized and sank.[26]The incident was, therefore, not
completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the
common carrier in breach of its contract of carriage that results in the death of
a passenger liable to pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is
fixed at P50,000.[29]
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual
income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by applying the
formula (2/3 x [80 age at death]) adopted in the American Expectancy Table
of Mortality or the Actuarial of Combined Experience Table of Mortality.[31]
The second factor is computed by multiplying the life expectancy by
the net earnings of the deceased, i.e., the total earnings less expenses necessary
in the creation of such earnings or income and less living and other incidental
expenses.[32] The loss is not equivalent to the entire earnings of the deceased,
but only such portion as he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.[33]
In computing the third factor necessary living expense, Smith Bell
Dodwell Shipping Agency Corp. v. Borja[34] teaches that when, as in this case,
there is no showing that the living expenses constituted the smaller percentage
of the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life
expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of
death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic
monthly salary of $900[35] which, when converted to Philippine peso applying
the annual average exchange rate of $1 = P44 in 2000,[36] amounts
to P39,600. Ruelitos net earning capacity is thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common
carriers breach of contract of carriage resulted in the death of petitioners son,
following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are
entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted recklessly,
thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.[37]
Under the circumstances, it is reasonable to award petitioners the
amount of P100,000 as moral damages and P100,000 as exemplary
damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also
be awarded where exemplary damages are awarded. The Court finds that 10%
of the total amount adjudged against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches
that when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
 with paragraph number 3 of the immediately cited guideline in Easter
1. When the obligation is breached, and it consists in Shipping Lines, Inc.
the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself WHEREFORE, the Court of Appeals Decision of August 19,
earn legal interest from the time it is judicially demanded. In 2008 is REVERSED and SET ASIDE. Judgment is rendered in favor of
the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or petitioners ordering respondent to pay petitioners the following: (1) P50,000
extrajudicial demand under and subject to the provisions of as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as indemnity for
Article 1169 of the Civil Code.
Ruelitos loss of earning capacity; (3) P100,000 as moral
2. When an obligation, not constituting a loan or damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount
forbearance of money, is breached, an interest on the amount adjudged against respondent as attorneys fees; and (6) the costs of suit.
of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall
be adjudged on unliquidated claims or damages except when The total amount adjudged against respondent shall earn interest at the rate of
or until the demand can be established with reasonable 12% per annum computed from the finality of this decision until full payment.
certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, SO ORDERED.
Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base
for the computation of legal interest shall, in any case, be on
the amount finally adjudged.

3. When the judgment of the court awarding a sum of

money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. (emphasis supplied).

Since the amounts payable by respondent have been determined with certainty
only in the present petition, the interest due shall be computed upon the finality
of this decision at the rate of 12% per annum until satisfaction, in accordance